#cfa #economics #surplus
Why consumer surplus is expressed by area (product of price and quantity)? Because the maximum amount a consumer would be willing to pay for a given quantity of a good is the sum of the maximum price they would pay for the first unit, the (lower) maximum price they would be willing to pay for the second unit, etc. Typically these prices are decreasing; they are given by the individual
demand curve.
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Economic surplus - Wikipedia, the free encyclopediaamount that they pay now is their consumer surplus. Note that the utility of the first few liters of drinking water is very high (as it prevents death), so the first few litres would likely have more consumer surplus than subsequent liters.
<span>The maximum amount a consumer would be willing to pay for a given quantity of a good is the sum of the maximum price they would pay for the first unit, the (lower) maximum price they would be willing to pay for the second unit, etc. Typically these prices are decreasing; they are given by the individual demand curve. For a given price the consumer buys the amount for which the consumer surplus is highest, where consumer surplus is the sum, over all units, of the excess of the maximum willingness to p Summary
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