Factors affecting economic surplus
Equilibrium prices are not static. They can evolve as pricing expectations on either side of the transaction change. Several factors, for example, can reduce a producer's minimum selling price threshold, including:
- Technology advancements that make producers more efficient.
- Government subsidies that lower costs.
- Cost efficiencies that become available as a company scales.
- Sudden increases in consumer demand that can support a lower unit production cost.
- Lessening of trade regulations that ease access to new markets and increase opportunities to create efficiencies of scale.
Lower manufacturing costs increase the available producer surplus. Competition, however, should encourage the producer to lower prices and share the surplus gain with consumers. This is one reason why antitrust laws exist in the U.S. -- to protect the economic benefits of healthy business competition. Ideally, efficiency gains introduce new, lower equilibrium prices rather than higher profits for one producer.