A farmer sells wheat to a baker

Oct 13, 2025 by wbrum.org 33 views

What are Surplus-Enhancing Transactions?

In economics, a surplus-enhancing transaction is a type of transaction that increases the overall surplus or benefit of a market or economy. This type of transaction typically involves the exchange of goods or services that are in high demand and have a low opportunity cost. In other words, surplus-enhancing transactions are those that create value for both parties involved in the transaction.

Characteristics of Surplus-Enhancing Transactions

Surplus-enhancing transactions typically have the following characteristics:

High demand: The goods or services being exchanged are in high demand, meaning that there are many buyers willing to pay a high price for them.
Low opportunity cost: The opportunity cost of producing or acquiring the goods or services being exchanged is low, meaning that the resources required to produce or acquire them are readily available and not being used for other purposes.
Mutual benefit: Both parties involved in the transaction benefit from the exchange, either by receiving a good or service that they value highly or by receiving payment for a good or service that they have produced.

Examples of Surplus-Enhancing Transactions

Here are a few examples of surplus-enhancing transactions:

A farmer sells wheat to a baker: The farmer has a surplus of wheat that they are not using, and the baker is willing to pay a high price for it to use in their bread. This transaction creates value for both the farmer and the baker.
A software developer creates a new app: The software developer creates a new app that meets the needs of many users, and they sell it to them for a price. This transaction creates value for both the developer and the users.
A restaurant sells food to customers: The restaurant has a surplus of food that they are not using, and the customers are willing to pay a price for it. This transaction creates value for both the restaurant and the customers.

Which of the Following Describes a Surplus-Enhancing Transaction?

Now that we have discussed what surplus-enhancing transactions are and what characteristics they have, let's look at the options provided in the question:

A. The federal government taxes the wealthy to pay for programs to help the poor: This transaction is not a surplus-enhancing transaction because it does not involve the exchange of goods or services between two parties. Instead, it involves the government taking money from one group of people and giving it to another group.

B. A person pays $10.00 to buy a scoop of ice cream at a baseball game: This transaction is a surplus-enhancing transaction because it involves the exchange of a good (ice cream) for money. The person is willing to pay a high price for the ice cream, and the vendor is willing to sell it to them for that price.

C. Your state government imposes a tax on gasoline: This transaction is not a surplus-enhancing transaction because it does not involve the exchange of goods or services between two parties. Instead, it involves the government taking money from one group of people (gasoline consumers) and using it for other purposes.

Conclusion

In conclusion, surplus-enhancing transactions are those that increase the overall surplus or benefit of a market or economy. They typically involve the exchange of goods or services that are in high demand and have a low opportunity cost. The examples provided in this article illustrate what surplus-enhancing transactions look like, and the options provided in the question demonstrate which one is a surplus-enhancing transaction.

References

Mankiw, G. (2017). Principles of Economics. Cengage Learning.
Krueger, A. (2018). Microeconomics. Worth Publishers.
Varian, H. (2014). Microeconomic Analysis. W.W. Norton & Company.