Trade

Trade is exchanging one widget (product or service) for another. When making a trade, one needs to be thinking about profit. Profit is equal to the price of a widget minus the cost it took to make that widget. You can also think about it like this: Price = cost + profit.

Companies need to sell widgets for more than they cost to make, because they need to make a profit. They maximize their happiness mostly by maximizing their profit.

A consumer surplus is the amount of money that is saved when consuming items. To consume an item means to use it up, not necessarily by eating it. Money is saved when an item costs less than expected or advertised, or is put on sale due to being unpopular or out of season. If consumers have extra money, they spend it; by spending it, they are consuming more.

A producer surplus, on the other hand, is when producers have too many of a widget. They must sell these items to make a profit. Producers should maximize their profits so they can use the money for different things, such as more supplies, services, or food. They want to sell at the highest price, but certain factors such as competition or weather might make producers put widgets on sale.

Something's utility means that it serves a purpose - you can use it, or you need it. You need to have a reason to purchase something. This reason may be biological (like food or water) or societal (like razors or shoes).

Different people have different utilities. For example, people with no hair don't need to buy shampoo or hairbrushes for themselves. Different utilities may be based on time (before vs. after holidays), location (state or country), or needs (age or disability).