About Total Surplus Calculator (Formula)
The Total Surplus formula is used to calculate the sum of consumer surplus and producer surplus. The formula is:
TS = CS + PS
- TS is the total surplus (in units of currency such as dollars or euros)
- CS is the consumer surplus (in the same units as TS)
- PS is the producer surplus (in the same units as TS)
Consumer surplus is the difference between the maximum amount that a consumer is willing to pay for a good or service and the actual amount they pay. Producer surplus is the difference between the minimum amount a producer is willing to accept for a good or service and the actual amount they receive.
The total surplus is the sum of these two measures and is a measure of the overall welfare generated by a market. A higher total surplus indicates that the market is generating more welfare for both consumers and producers.
It is important to note that the formula is based on the assumption that the market is in equilibrium, which means that the quantity supplied is equal to the quantity demanded and that there are no market failures such as externalities or information asymmetries.
In practice, the market may not always be in equilibrium and other factors may affect the total surplus.