Value Concept and Economic Surplus: A Suggested Reformulation

Abstract

Value concept and economic surplus are very important in explaining value creation and value distribution in the economy. From the value creation perspective, this paper explores the value concept to understand the relationship between price and value for a commodity in the market, in which value is created in the consumption, and price has a role in value distribution between firms and customers. Theoretical models are developed to identify the supply functions on the logic of maximizing behaviors in the market. The numerical experiments are used to conduct the value balance between the firm and the customer, the value balance is also a necessary condition for market equilibrium including price equilibrium and value equilibrium. The study result reveals that economic surplus is reformulated under market equilibrium, but it is measured upon the maximizing behaviors of firms and customers in the market. The paper contributes to the development of value theory that provides a clear understanding of market behavior and welfare analysis in the economy.