Economic surplus is what one are willing to give up for a benefit minus what he must give up for it. Understandably, an economic activity takes place if the economic surplus of the activity is positive. Economic activities with negative economic surpluses wipe themselves.
Economic surplus is subjective, therefore an activity bearing a positive economic surplus to one isn’t necessarily so to another.
Social Surplus = Producer surplus + Consumer surplus
= Amount received by sellers – Cost to sellers + Value to buyers – Amount paid by buyers
= Value to buyers – Cost to sellers
Consumer surplus and producer surplus are the basic tools that economists use to study the welfare of buyers and sellers in the market, which help to address the fundamental economic question of whether the allocation of resources is desirable or not.
On financial terms, a somewhat static definition of economic surplus is stated as the difference between the market value of an economic entity’s assets and that of its liabilities.