Surpluses

Surpluses refer to conditions in which available resources exceed needs, or inflows exceed outflows, depending on context. The term is used in economics to denote excess value or quantities in markets, public finances, and international trade, as well as in production and inventory management.

In market economics, surpluses are often discussed in terms of welfare rather than excess supply. Consumer surplus is the difference between what buyers are willing to pay and what they actually pay; producer surplus is the difference between the price received by sellers and their marginal cost. The sum of consumer and producer surplus is called total surplus, a standard measure of economic efficiency under competitive conditions. A market that clears at equilibrium maximizes total surplus; a price above equilibrium creates a surplus of goods (unsold inventory) and a price below equilibrium creates a shortage.

Public finance and international accounts use the term to describe fiscal or external balances. A government budget surplus occurs when revenue exceeds expenditures. A trade surplus arises when a country’s exports exceed its imports. A current account surplus exists when net capital inflows and primary income from abroad combine with positive net exports.

In operations and accounting, surplus may refer to inventory surplus (excess stock beyond forecast or required levels) or to surplus assets and funds that are not immediately allocated.

See also deficits, balanced budgets, external balance. The interpretation and desirability of a surplus depend on context and policy goals.