Consumer surplus, also known as buyer’s surplus, measures the economic benefit of a certain product’s price to consumers. It occurs when consumers pay less for a product than the maximum price they are willing to pay. Consumer surplus increases as the price of the product fall and decreases as the price rises. Consumer’s Surplus = …
In a producer surplus, businesses sell the product at a higher price than they are willing to sell. For example, the cost of a product is 10 USD, and the company is willing to sell it at 12 USD, but they decide to sell it at 15 USD. In this case, the producer surplus of …
Definition: When a business has more inventory than it needs, it is called an inventory surplus. The main scenarios that lead to a surplus inventory are inaccurate forecasting for demand and/or buying items in bulk to get the benefit of economies of scale. Other, more minor, reasons can be changes in market conditions or changes …
Definition: In a budget deficit, expenses are higher than the revenue generated during the same period. In most cases, governments use this term while presenting the budget for the next financial year. A budget deficit is not desired, and to overcome this situation, governments can cut spending or raise taxes until the budget balances, or …