What does economic surplus represent?

Economic surplus represents the overall benefit that is realized in a market, encompassing both consumer and producer surplus. Consumer surplus is the difference between what consumers are willing to pay for a good or service and what they actually pay. Producer surplus, on the other hand, is the difference between what producers are willing to accept for their goods or services and the actual price they receive. By combining these two types of surplus, economic surplus captures the total welfare that is generated in the market from the trade of goods and services. This comprehensive measure helps economists and policymakers evaluate the efficiency and effectiveness of markets, as a higher economic surplus indicates a better allocation of resources and greater overall satisfaction for both consumers and producers.