I'm in first-year business school, and am taking economics for the first time. I'm not too clear on what exactly a social surplus is? Can anyone explain using simple examples, just so that I may have this clarified? Thanx
Is social surplus synonymous with public surplus?EnumaElish said:Loosely, private surplus is value minus price; social surplus is value minus cost.
No. Public [sector] surplus relates to the public (as opposed to private) sector, and normally means an accounting surplus or a surplus in terms of resources similar to a budget surplus. Social surplus is also counterposed against private surplus, but in a different context. Private surplus is a measure of the total utility realized through market transactions. But not all utility is realized via market transactions. Examples are externalities and public goods. As a result, part of the surplus that is enjoyed by the society as a whole is not captured by private surplus If economic externalities or public goods did not exist, then social surplus would have been identical to private surplus (= producer surplus + consumer surplus).Smurf said:Is social surplus synonymous with public surplus?