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haggling 'acquires' Consumer Surplus ?
money has a decreasing marginal utility
There's reason to suspect that money has a decreasing marginal utility. But if I take this to be true, I can't see how social surplus (or consumer surplus, or producer surplus) really measures anything important. Ultimately, what one would hope to optimize (at least from a microeconimics-style vantage point) is in terms of utility, not dollars. Does it make sense to anyone why I might be confused? Is there a more complicated market model that measures social surplus in a better way? --Ryguasu 02:25, 18 Aug 2004 (UTC)
- The utility is expressed in dollars.--Patrick 09:42, 18 Aug 2004 (UTC)
- Right. But I'm still confused. Maybe I can better express my objection with an example: Suppose person A would pay up to $15 for some newly released compact disc, and person B would pay up to $1000. If the disc is being sold for $10, then the consumer surplus is (15-10) + (1000-10) = 5 + 990 = $995. Note that person B is responsible for almost all the consumer surplus. But let's suppose that person B already has a very extensive music collection, and that the new album would actually give him much *less* subjective pleasure than it would give person A; the reason he'd be willing to pay so much more for the disc is that he's a billionaire, and has so much money he doesn't know what to do with it. It seems that in some *reasonable* measure of utility-to-consumers, it wouldn't be person B but person *A* -- i.e., the one who'd experience greater psychological pleasure from the album -- who would be responsible for almost all the total utility. Thus I'm not convinced that consumer surplus is a measure of anything worth caring about. --Ryguasu 16:56, 18 Aug 2004 (UTC)
- Perhaps adding surplus of a number of people is not so useful, but it is still a measure for how good a deal is for an individual, compared with other deals.
- --Patrick 22:12, 18 Aug 2004 (UTC)
The illustration seems not to work. --
- The problem arises from the way that consumer surplus is derived. To be very brief, the consumer surplus you're seeing here is actually used analogous to the "real" consumer surplus concept, which is derived from (and only holds for) quasi-linear utility functions (u(x)=v(x_1)+x_2). From this function, and given v(0)=0, it is possible to measure the welfare loss denoted in "income". If you want, you can contact me, and I'll give a detailed explanation (my mail is my first and last name seperated by a dot @gmail.com). If you want to read it in a book, see Hal Varians Intermediate Microeconomics. --Patrick Mogensen (not the same Patrick as above) —Preceding undated comment added 17:02, 15 January 2011 (UTC).
The concept of surplus is too narrow
The concept of surplus is too narrow:
Surplus economics is the study of economics based upon the concept that economies operate on the basis of the production of a surplus over basic needs.
Economic Surplus: By economic surplus is meant all production which is not essential for the continuance of existence. That is to say, all production about which there is a choice as to whether or not it is produced. The economic surplus begins when an economy is first able to produce more than it needs to survive, a surplus to its essentials. This definition is no more arbitrary than defining all resources as scarce by definition by declaring all wants infinite. In fact it is much less so since the line between existence and non-existence is a real one.
Alternative definitions are:
1. The difference between the value of a society's annual product and its socially necessary cost of production. (Davis, p.1) 2. The range of economic freedom at its [society's] disposal, extent able to engage in socially discretionary spending that satisfies more than the basic needs of its producers. (Dawson & Foster in Davis, p.45) 3. Income minus essential consumption requirements. (Lippit in Davis p.81) 4. The difference between what a society can produce and what a society must produce to reproduce itself. (Standfield in Davis, p.131)
Argument: Economics is usually defined as the problem of how best to distribute limited resources, limited because wants are characterised as unlimited. Surplus economics argues that rather than limited resources, there is an abundance of resources and this is the economic problem. The difference is one of perspective. If wants are the focus, then of course resources are limited, but if needs or essentials are used as the foundation, then resources are seen to be abundant. The difference is between a description and an explanation. A focus on wants describes a free market situation, a focus on essentials allows an explanation of the economy to begin.
An abundance of resources means that not all need to work productively and that some can use more resources than others. Who shall be the lucky ones and how to keep the unlucky quiet is part of the economic problem. Abundance is also a problem because having more resources than is strictly needed to live presents a danger to the production processes and the command over resources that created an economic surplus in the first place.
Surplus economics seels to answer such questions as: Why does so much waste exist along side of so much poverty?
The orthodox assumption of scarcity has survived even the staggering levels of surplus of modern economies because this assumption suits the needs of those who command resources and who prefer to ensure that the economy does not become democratised; that unpleasant tasks are done by someone else, that some win and many lose.
* Monopoly capital: an essay on the American economic and social order
Paul A. Baran and Paul M. Sweezy
* The Economic surplus in advanced economies
John B. Davis (Ed)
* The economic surplus and neo-Marxism
Ron J. Stanfield
- Forgive me if I misunderstopod the first lesson of economics, but surely the scarcity is real, becuase resources are limited compared to wants? We can't match every desire. Al;though, I somewhat agree: in the under marklet economies, it seems we're getting close to satisfying a large number of the demands. Credit, certainly, seems to act as a divine wish-answerer. Not that this is really what Wikipedia is for, but, you'know. Larklight (talk) 20:51, 16 January 2008 (UTC)
(moved from User talk:Classicalecon)
Hello, your edit http://en.wikipedia.org/w/index.php?title=Economic_surplus&diff=294493605&oldid=prev removed a source from university lecture notes, and replaced it with a differing, unsubstantiated statement. Could you please find a reference for your statement, or at least add "Citation needed" to encourage someone to find one. I am not an economics expert, but the source you deleted made more sense to me than the statement you added. Thank you. —Preceding unsigned comment added by 184.108.40.206 (talk) 14:50, 5 June 2009 (UTC)
- The short answer is that in calculating economic profit, firms must be imputed the cost for all inputs - including the opportunity costs for inputs that they happen to own or control. The supply curve for an industry made up of many small firms (the perfectly competitive case) is derived from input costs. It is true that the size of any single firm is too small to affect the price paid for inputs significantly, so the individual firm acts as a price taker as far as costs are concerned - but the input of the industry as a whole does affect price, so the industry as a whole has an upwardly sloping supply curve, and producer's surplus results. All of this is explained in David Friedman's Price Theory Chapter 9 (figures 9-13a and 9-13b), and the application to producer's surplus is even more clearly explained in Friedman's book Hidden Order: The Economics of Everyday Life. --Classicalecon (talk) 15:48, 5 June 2009 (UTC)
Distinction From Economic Rent
I cannot find an authoritative source for the true distinction of producer surplus from economic rent, but it seems clear enough to me. Producer surplus inures to a producer due to productive activity. economic rent inures to an owner simply because the owner owns (controls) a factor of production that cannot be easily substituted. Producer surplus is "earned" and economic rent is not. Paretian rent seems therefore to actually be producer surplus and there is no such thing as "Paretian rent". One of the favorite examples of Paretian rent is the celebrity (most often a sports star) who's only other talent would be digging ditches. The difference between the wages of a ditch digger and a baseball star is branded as Paretian rent. The point that makes it a producer surplus as opposed to a rent is that the celebrity must actually perform (produce), or the celebrity will get no pie. The owner of land can be sunning himself on the Riviera and he still gets the remuneration simply because of ownership. That amount paid to a producer over and above the amount needed to keep the producer in his current occupation is a producer surplus. Being correct doesn't count until you can find some wonk that has said what you know to be true.--The Trucker (talk) 21:08, 5 January 2011 (UTC)
When looking for an article on Government Surpluses you are sent to this article. There is nothing useful her when trying to determine just what it means by the government budget having a surplus. Maybe a section could be added to elaborate on this idea, and cut down on the economic jargon some...Zath42 (talk) 17:28, 23 July 2009 (UTC)