Why Economic Surplus Matters More Than Scarcity in Modern Economics

This essay examines the concepts of economic surplus and scarcity, arguing that surplus should be the primary focus in economic analysis. It highlights the significance of both consumer and producer surplus in driving economic growth and achieving market equilibrium. The essay explores how understanding the dynamics of supply and demand, along with factors like overproduction, underproduction, taxes, and transaction costs, impacts economic surplus. It concludes that maximizing total surplus, which benefits both consumers and producers, is essential for the overall well-being of society and that businesses, governments, and consumers need to deeply understand both surplus and scarcity concepts for better economic outcomes. Desklib provides access to this essay and other study resources for students.

The essential orienting
concept in economics should
be the idea of surplus not
scarcity

Table of Contents
INTRODUCTION...........................................................................................................................3
“The Essential Orienting Concept in Economics should be the idea of Surplus not Scarcity”.......3
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................1

INTRODUCTION
Surplus and Scarcity both are important concept in the economic that influence the
decision-making of the consumers and government. The present report will cover the discussion
on why the essential orienting concept in economics should be the idea of surplus not the
scarcity. The report will discuss how the surplus concept plays important role in economics
which influence the key stakeholders more than scarcity concept of economics.
“The Essential Orienting Concept in Economics should be the idea of Surplus
not Scarcity”
Economic surplus are basically of two types such as consumer surplus and producer
surplus which describes the gain to both consumer and producer. Consumer surplus is a gain
which a consumer enjoy when they purchase a product and services from the supplier at low
price as compared to the highest price consumers are willing to pay. While on the other hand,
producer surplus is a gain which producers enjoy by selling the products and services at the price
which is higher than the least price they are willing to sell. Economic scarcity which is also
known as the shortage is a situation where the supply of the goods and services are less than the
demand of such goods and services (Sadik-Zada, 2020). It means that the resources to satisfy the
wants and needs of the people are limited. Generally, in economics the concept of scarcity is
essential concept for decision-making rather than the surplus concept. But the above statement is
arguing that economist has to use the surplus concept in their study rather than the scarcity
concept because it is helpful for the small businesses that want to grow and expand.
The economy of the country are known because of its businesses and educations
development and understanding the growth of both this factor requires economic surplus concept
not the scarcity idea. The idea of economic surplus is highly changes with the change in the price
of the goods and services. Understanding the business surplus is important for both businesses
and government as it helps them in making the best decision about the setting prices of the
products and services. It is because at the time when the price of the goods and services are
increases by the company leads to the production surplus from each transaction but on the other
hand it also leads to the fall in consumer surplus (Zilberman, 2019). It is because at the highest
price which is set by business all customer unable to buy that product. It might be because of the
low income level of the consumers who can't afford the products at high price. The further

impact of this over the businesses is that their sales level start decreasing because of the high
price of the goods. So, on this basis it can be state that a sharp decrease in the sale because of
high price also leads to lower total producer surplus.
Thus, it is important for the business and government that they have to identify the
situation and price of the products and service at which both buyers are willing to buy the
products and consumers are willing pay for the products. The concept of scarcity involve the
limited resources is one of the most basic economic problems faces by the country. The impact
of shortage of resources over the market is such that it will encourage the consumers to buy the
same product even at the high price which will further leads the situation of inflationary gap. The
further impact of inflation because of shortage will lead to lower growth of economy. Along with
this, the education price also get increases because of the shortage of education service in the
market (Lambert, 2021). This will further lead to the increase in the unemployment rate. It is
identified in the research that the three main economic problem is problem of allocation of
resources, full employment and the economic growth which need to further increases because of
the shortage of resources in the market. Thus, it is important for the economist that they should
consider the idea of surplus as an essential orienting concept of economics rather than scarcity.
It is important for the economist, government and consumer to understand that there is
must be a direct link between the economic surplus and economic growth. For example, if
the company have cash surplus within their businesses then they can use the same for their
business expansion and invest it further in the high profitable projects. But on the other hand, if
the company have low surplus which is not sufficient for the operations of the business. Then in
such case they need to utilize the same from the market. The same case with the other resources
also where identification of surplus helps the businesses as well as consumers to make the proper
decision-making (Sevcenko and et.al., 2021). Understanding and applying the surplus concept is
important within the economic as it plays crucial role in defining the total welfare. Economic
surplus in simple term means the respective gain to both consumer or producers which they get
within an economic activity which as also known as total surplus or community surplus. The
economic surplus concept basically follows the rule of demand and supply where business want
to earn profit by selling more and consumers wants to buy the same at low price.
Supply and demand rule state the interaction between the sellers of a resources and the
buyer of the same resources on the set prices. At high prices, supply increase with decrease in

demand on the other hand at the low price, supply decreases while increase in demand. It is
further stated that when the supply and demand of consumers and producers are in perfect shape
then this results into the market equilibrium which is also known as allocation efficiency. On the
basis of above rule of supply and demand it can be stated that the economic surplus is also
essential concept in economics to identify and manage the market equilibrium in the competitive
market of the country (Seaman, 2020). In the competitive market, the equilibrium arises at the
price of goods and services when the total quantity of that goods and service that buyer is willing
or able to buy is same or exactly equal to the total quantity that seller is willing and able to buy.
For example, the price of the 1 kg coffee is 12 euros and the customers are ready to buy 1 kg
coffee at 12 price along with the producers are also ready to sell the 1 kg coffee at same price
than this is a situation of market equilibrium.
In order to identify the equilibrium situation, the government and economist have to use
the concept of surplus which indicate that surplus concept is more essential economic idea than
the scarcity. The primary causes of economic surplus is such that when the supply and demand
of a particular goods and services is out of sync. Along with this, the overproduction and
underproduction is also factors that can affect the economic surplus and market efficiency which
need to be considered by the economist and businesses in their decision-making process
(Ljungqvist and Sargent, 2017). Taxes and high transaction cost is also two most important
factors which affects the economic surplus.
The small businesses of the country have to consider and use the surplus concept of
economics in their decision-making process because the gain of the consumer from their
products and service will force the consumers to continue with the same company even in the
future. While on the other hand, the increase in the production surplus require high prices of the
products and services which helps the business in achieving the higher profitability. On this
basis, it is stated that consumer surplus provides benefits to consumer and producer surplus
provides benefits the producers but it is important that the total surplus when started maximizing
gives benefits to the whole economy of the country (Edwards. and et.al., 2017). It is because the
total surplus is a desirable objective of an economic system which work for the maximization of
the well-being of the society. However, surplus is not always beneficial for the businesses
because when such surplus is affected by the scarcity of the demand of specific products and

services. Thus, for the better and continuous growth of the economy, the businesses, government
and consumers need to understand both surplus and scarcity concept deeply.
CONCLUSION
The report has concluded the two concept of economic in this essay and that is surplus
and scarcity. This essay has covered the importance of surplus in economics and this must be
considered as essential orienting concept of economic rather than scarcity. The report has
concluded how the growth of the economy is linked with the total surplus which involve both
consumer surplus and producer surplus. Further, the report has also concluded how the economic
surplus is linked with the supply and demand rule of the business.

REFERENCES
Books and journals
Edwards, E. C. and et.al., 2017. Economic insight from Utah’s water efficiency supply
curve. Water. 9(3). p.214.
Seaman, B. A., 2020. Economic impact of the arts. In Handbook of Cultural Economics, Third
Edition. Edward Elgar Publishing.
Sevcenko, V. and et.al., 2021. Surplus Division between Labor and Capital: A Review and
Research Agenda. Academy of Management Annals, (ja).
Lambert, T. E., 2021. Conjectures of English and UK Economic Surplus, Investment, Tax
Revenues and Deficit Amounts from the 13th to the 19th Century. Investment, Tax Revenues
and Deficit Amounts from the 13th to the 19th Century (August 6, 2021).
Zilberman, D., 2019. Agricultural Economics as a Poster Child of Applied Economics: Big Data
& Big Issues 1. American Journal of Agricultural Economics. 101(2). pp.353-364.
Sadik-Zada, E. R., 2020. Distributional bargaining and the speed of structural change in the
petroleum exporting labor surplus economies. The European Journal of Development
Research. 32(1). pp.51-98.
Ljungqvist, L. and Sargent, T. J., 2017. The fundamental surplus. American Economic
Review. 107(9). pp.2630-65.
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