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Marginal Surplus

Definition

Marginal surplus refers to the difference between an individual's willingness to pay for a good or service and its market price. It represents how much extra utility or satisfaction someone gains from consuming one more unit of a product.

Analogy

Imagine you are at an all-you-can-eat buffet where each plate costs $10. If after eating three plates, you still feel like having another plate but would only pay $5 for it, your marginal surplus would be $5 since your willingness to pay is lower than the market price.

Related terms

Consumer Surplus: The difference between the price a consumer is willing to pay for a good or service and the actual price they pay. It represents the extra benefit consumers receive from purchasing a product at a lower price.

Producer Surplus: The difference between the market price of a good or service and the minimum price producers are willing to accept. It reflects the additional profit that producers gain by selling their products at a higher price than their production costs.

Total Surplus: The sum of consumer surplus and producer surplus in a market. It measures the overall welfare or economic efficiency generated by an exchange of goods or services.