How much would you pay for a bowling ball? Seven dollars? Fine, then let's say you go to the bowling-ball store and you see them on sale for five dollars. You might say to yourself (perhaps out loud, if your cognitive abilities are not fully developed) that you would save two dollars by making that purchase. In that case we say that the consumer surplus is two dollars.
Similarly, let's say that the bowling-ball dealer is willing to accept four dollars, but his duplicity led him to post a five-dollar price. Now we say that the producer surplus is one dollar.
That's the theory of consumer surplus and producer surplus. In practice, though, consumer surplus hardly ever exists -- and producer surplus is ubiquitous and often immense.
How can this be proven? We could examine the intricacies of my complex formulae, but an audience of people with average literacy obviously cannot be expected to comprehend even the most basic elements of the language of advanced theorists.
Instead, let's look at examples. Aren't prices too high? If you think so, then you've just proven that there is no such thing as consumer surplus. And aren't you underpaid? Well, that's a lot of producer surplus.
In fact, it is producer surplus that accounts for much of the world's inequities; specifically, the vast gulf between the rich and poor, and the confluence of corporate and Republican interests in undermining the honest yet simple working people.
How does this happen? Very simple. Let's say that your job is cleaning tables at a restaurant, and your pay is sub-minimum. You work very hard to clean those tables so that you can barely make ends meet. You can only own one car, your children do without pay-per-view, and you smell bad because your health insurance will not pay for deodorant. Meanwhile, the restaurant manager is rolling in money. He sits in the back, belly full of food, and smokes rolled up thousand-dollar bills. Perhaps he even abuses you and spits on you. And no doubt, he ridicules your ethnicity and insults your people. If you are a female, he demands sex and then beats you.
But he only has this wealth and power because you are cleaning tables. You have created value, and yet...the manager gets the reward! This is unbounded producer surplus because he is not returning the wealth that you created. It is not his – it is yours. Progressive economists call this "exploitation". And a decent government would call this "illegal".
The fact of the matter is that you should have his wealth. And that can be accomplished with fair, but highly punitive, taxes. At that point, the producer surplus would be reduced to a humane level, and there will no longer be any need to discuss surplus value. Ultimately, with proper policies in place, these concepts will be removed from all economics texts and, indeed, from our vocabulary as well.