Consumer Surplus

Consumer Surplus
Consumer surplus is a measure of the welfare that people gain from the consumption of goods and services with regard to the prices they pay for it.
Consumer surplus is the difference between the total amount that consumers are willing to pay and what they actually pay for a good or service (indicated by the demand curve) . Consumer surplus is a measure of welfare.
The amount of consumer surplus can be derived from the demand curve. The price of a commodity is determined by the interaction of demand and supply curve.


Consumer surplus = Amount a consumer is willing to pay – amount he actually pays.
Here P is the equilibrium price ie the market price.

Here,

Consumers are willing to pay P1 for Q1 quantity of commodity.
But they actually pay P.
Here,triangle PP1AE is the consumer surplus

Consumer Surplus = region ABPP1


1 comment:

gaurav said...

here consumer surplus is the upper triangle complete not the abpp1 rectanagle