Social surplus
The sum of consumer surplus and producer surplus. Maximised in the free market, when the market operates at its equilibrium point.
Social surplus is important since it considers not just producers and consumers individually, but them together as a society.
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Questions
Recap questions
1 of 5
A per-unit tax is imposed on a good, shifting the supply curve upward by the tax amount. Which best describes the impact on surpluses?
Note
DefinitionSocial SurplusThe sum of consumer surplus and producer surplus, representing the total net benefit to society from market transactions.
AnalogyThink of social surplus as a pie that represents all the benefits from a market. The pie is divided into two slices: one for consumers and one for producers. At equilibrium, the pie is at its largest size.
Common MistakeStudents often forget that social surplus includes both consumer and producer surplus. Always remember to consider both parts!
