economic surplus

Economic surplus is used to describe a situation in which the financial assets of an entity, such as an individual, business, or government, exceed its financial liabilities. For an individual, economic surplus is said to exist if that person has a certain amount of money to live on at the beginning of the month, yet does not spend it all during the period, thereby creating a budget surplus by the remaining amount. In case of a business, if a company’s earnings exceed all its expenditures, including labor costs, production costs and investment losses, the amount remaining is the economic surplus. Government economic surplus occurs when the amount of money a government makes through taxes and tariffs, exceeds the amount it spends on salaries, public works, policy initiatives etc.