Surplus value is a central concept in
Karl Marx's critique of political economy. Marx did not himself invent the term, he developed the concept. "Surplus value" is a translation of the German word "
Mehrwert", which simply means
value added (when the sales revenue is less than the cost of materials used up). Conventionally, value-added is equal to the sum of gross wage income and gross profit income. However, Marx's use of this concept is different, because for Marx, the
Mehrwert refers to the yield, profit or return on production capital invested, i.e. the amount of the increase in the value of capital. Hence, Marx's use of
Mehrwert has always been translated as "surplus value", distinguishing it from "value-added". According to Marx's theory, surplus value is equal to the new value created by workers in excess of their own labour-cost, which is appropriated by the capitalist as profit when products are sold.