Surplus Vs Social Surplus Essay

Different types of industries simply have different costs and benefits; therefore to perceive their own costs and benefits by using the concepts of consumers’ surplus, producers’ surplus and social surplus; we firstly had better understand what consumers’ surplus, producers’ surplus and social surplus are.

According to Economic Online, Consumers’ surplus is a measurement of consumers’ satisfaction by calculating the difference of the amount that consumers are willing and able to pay for a good or service and the total amount they actually pay. While producers’ surplus is the benefit for producers got from selling good or service at market price that is higher than the price they willing to sell. Lastly, the social surplus is the value that

Besides this, monopolist tend to produce good in the small quantity and charge in high price; which results in deadweight loss and eventually decrease social surplus or total surplus.

3. Monopolistic Competition

This kind of industry stands in the middle between the perfect competition and monopoly. It has many buyers and sellers producing slightly different products which can be easily substituted.

Benefits

Diversities of goods and services are out there for consumers to choice, which can produce positive consumers’ surplus. Another good point to consider is efficiency. Since there’s competition in the market, producers try to produce the good or service in the efficient way as possible as they can.

Cost

It is a waste on advertising because each firm tries to show or persuade their customers that their products or services are different from the other product or service on the market.

4. Oligopoly

There are only few large firms in the market and they are interdependence.