What is total surplus in an economic context?

Total surplus in economics is defined as the sum of consumer surplus and producer surplus. Consumer surplus refers to the difference between what consumers are willing to pay for a good or service and what they actually pay, reflecting the additional benefit consumers receive from purchasing a good at a lower price. Producer surplus, on the other hand, is the difference between the price producers receive for a good and the minimum price they would be willing to accept to produce it, capturing the advantage that suppliers gain from selling at a market price higher than their costs.

When we consider total surplus, we are looking at the overall economic efficiency and the net benefit to society from the production and consumption of goods and services. A larger total surplus indicates a more efficient allocation of resources, where both consumers and producers are benefiting from market transactions. This reflects the welfare of society as a whole, is maximized when resources are allocated efficiently, and is consequently foundational for assessing economic wellbeing.

Other options, such as producer surplus alone, total demand for a good, or total output of goods, do not capture the whole picture of economic welfare because they do not integrate both the benefits received by consumers and producers collectively. Only by considering both surpluses can we truly understand total surplus and its implications for economic efficiency