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Consumer Surplus
Consumer surplus is the area below the demand curve but above the actual price paid. It is the difference between the amount consumers are willing to pay and the amount they have to pay for a good.
Consider the market for a good.
- If the market price is $100, then the 30th unit will not sell because those who demand it are only willing to pay $60 for the good.
- At $100, the 17th unit will sell because those who demand it are willing to pay up to $100 for the good.
- At $100, the 5th unit will sell because those who demand it are willing to pay up to $133 for the good.
- For all those goods under 17 units, people are willing to pay more than $100.
- The area represented by the distance above the actual price paid and below the demand curve is called consumer surplus.
- This area represents the net gains to buyers from market exchange.
Lower market prices increase the amount of consumer surplus in the market.
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Subject 5. Consumer Surplus, Producer Surplus, and Total Surplus
Consumer Surplus Consumer surplus is the area below the demand curve but above the actual price paid. It is the difference between the amount consumers are willing to pay and the amount they have to pay for a good. Consider the market for a good. If the market price is $100, then the 30th unit will not sell because those who demand it are only willing to pay $60 for the good. At $100, the 17th unit will sell because those who demand it are willing to pay up to $100 for the good. At $100, the 5th unit will sell because those who demand it are willing to pay up to $133 for the good. For all those goods under 17 units, people are willing to pay more than $100. The area represented by the distance above the actual price paid and below the demand curve is called consumer surplus. This area represents the net gains to buyers from market exchange. Lower market prices increase the amount of consumer surplus in the market. Producer Surplus Producer surplus is the difference between the minimum supply price, represented by the supply curve, and the actual sales price
Subject 5. Consumer Surplus, Producer Surplus, and Total Surplus
Consumer Surplus Consumer surplus is the area below the demand curve but above the actual price paid. It is the difference between the amount consumers are willing to pay and the amount they have to pay for a good. Consider the market for a good. If the market price is $100, then the 30th unit will not sell because those who demand it are only willing to pay $60 for the good. At $100, the 17th unit will sell because those who demand it are willing to pay up to $100 for the good. At $100, the 5th unit will sell because those who demand it are willing to pay up to $133 for the good. For all those goods under 17 units, people are willing to pay more than $100. The area represented by the distance above the actual price paid and below the demand curve is called consumer surplus. This area represents the net gains to buyers from market exchange. Lower market prices increase the amount of consumer surplus in the market. Producer Surplus Producer surplus is the difference between the minimum supply price, represented by the supply curve, and the actual sales price
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