Calculate total surplus by adding consumer and producer surplus, or estimate the triangular surplus area for straight supply and demand curves meeting at an assumed equilibrium quantity.
- All Business Calculators
- Consumer Surplus Calculator
- Producer Surplus Calculator
- Consumer Price Index (CPI) Calculator
Total Surplus Formula
The following formula is used to calculate a total surplus.
- Where TS is the total surplus (in currency units, e.g., $)
- CS is the consumer surplus (in currency units, e.g., $)
- PS is the producer surplus (in currency units, e.g., $)
To calculate total surplus, add consumer and producer surplus in the same monetary units and period. The linear graph method uses TS = ½ × Q × (demand price intercept − supply price intercept); an optional equilibrium price splits the total into consumer and producer areas. It assumes equilibrium rather than proving it and excludes tax revenue and external effects.
Total Surplus Definition
What is a total surplus? Total surplus is a term used in economics to describe the sum of consumer surplus and producer surplus generated by a market at a given price and quantity. The consumer surplus and producer surplus can be calculated using the calculators linked above.
Example Problem
How to calculate total surplus?
- First, determine the consumer surplus.
This is the area above the market price and below the demand curve. For this example, the consumer surplus is $25.00.
- Next, determine the producer surplus.
This is the area below the market price but above the supply curve. For this example, the producer surplus is $15.00.
- Finally, calculate the total surplus.
Using the formula, the total surplus is found to be $25.00 + $15.00 = $40.00.
About Total Surplus
Can total surplus be negative? Under the standard supply-and-demand definitions, consumer surplus and producer surplus are nonnegative for trades that actually occur, so total surplus (CS + PS) is not negative. (A firm can still have negative accounting profit if fixed costs are high, even though producer surplus—based on marginal cost—is nonnegative.)
How to increase total surplus? In general, total surplus increases when buyers’ willingness to pay rises (demand shifts outward), production costs fall (supply shifts downward), or market distortions such as taxes/price controls that create deadweight loss are reduced.
When is total surplus maximized? Total surplus is maximized at the efficient quantity where marginal benefit equals marginal cost; in a competitive market without externalities or market power, this occurs at the market equilibrium.
