YOGYAKARTA Consumer surplus and producer surplus are two terms used by economists to understand the economic welfare of sellers and buyers in a market. Both are often used in the economic knowledge of welfare or commonly known as welfare economics.
The welfare economy is a study that studies the influence of resources on economic well-being. For more details, see the following explanation.
According to the Big Indonesian Dictionary (KBBI), the surplus is defined as a number that exceeds the usual results. Whereas in the context of consumer surpluses and producer surpluses, the understanding of surpluses is adjusted.
In the Measurement of Benefits and Costs (Measurement Cost Benefit Analysis) written by Dr. Tanti Novianti, SP, MSi, it is explained that the consumer surplus is the value of a consumer's willingness to pay for an item minus the value that he should have paid for. Consumer surplus can also be understood as a measure of benefit (benefit) that can be in the form of money (monetary gain), welfare (welfare), or satisfaction (satisfaction), obtained by buyers from the purchase and purchase of goods or services.
From this understanding, it can be understood that the consumer surplus is a voluntary price difference paid by consumers at a price that must be paid in order to get the goods or services they get.
For example, a consumer surplus illustration, a person wants to sell a type Z car in Jakarta. Then there are buyers who are interested in buying the car for Rp. 100 million. On the other hand, the price of a type Z car in the market is Rp. 80 million.
The willingness of buyers to pay (willingness to pay) for the car was carried out without coercion even though the car market price was below the market. That's where there is a consumer surplus whose value is Rp. 20 million, obtained from a reduction of Rp. 100 million (reduced) Rp. 80 million.
Meanwhile, the producer surplus (productor surplus) is a measure of the difference between the amount that producers can get from producing or selling goods or services in the market with a minimum benefit that can still be accepted by producers when producing or selling goods or providing services.
As an illustration, a company plans to build an office building. The company held an open tender and four construction service providers, namely A, B, C, D, offered prices.
Each service provider successively proposes a different price, ranging from Rp. 100 million, Rp. 200 million, Rp. 300 million, and Rp. 400 million.
Each construction service provider has different qualifications that affect the proposed bid price. Meanwhile, the proposed price has a minimum acceptable figure taking into account the qualifications in each construction service.
Meanwhile, the cost budgeted by the company to build an office building is IDR 150 million. So company A who won the offer with a producer surplus of IDR 50 million.
The term producer surplus can also be interpreted as the difference in sales revenue minus the production costs that must be incurred. In the above case, the production surplus obtained by construction service provider A is IDR 50 million which is obtained from a reduction of IDR 150 million minus the production cost of IDR 100 million.
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