Consumer Surplus
Definition
Consumer surplus refers to the difference between what consumers are willing to pay for a good or service and what they actually have to pay. It represents the extra benefit or value that consumers receive from purchasing a product at a price lower than their maximum willingness to pay.
Analogy
Imagine you're shopping for a new pair of sneakers, and you find your favorite brand on sale for $50 instead of the usual $100. The consumer surplus is like the joy and satisfaction you feel knowing that you saved $50 while still getting the shoes you wanted.
Related terms
Producer Surplus: Producer surplus is similar to consumer surplus but from the perspective of producers. It represents the difference between what producers are willing to sell a good for and what they actually receive.
Deadweight Loss: Deadweight loss occurs when there is an inefficient allocation of resources in a market, resulting in lost economic welfare.
Price Elasticity of Demand: Price elasticity of demand measures how responsive consumers are to changes in price. It helps determine whether demand is elastic (sensitive) or inelastic (insensitive) to price changes.
"Consumer Surplus" appears in:
Subjects (1)
Study guides (5)
AP Microeconomics - 2.6 Market Equilibrium and Consumer and Producer Surplus
AP Microeconomics - 2.7 Market Disequilibrium and Changes in Equilibrium
AP Microeconomics - 2.8 The Effects of Government Intervention in Markets
AP Microeconomics - 2.9 International Trade and Public Policy
AP Microeconomics - 4.3 Price Discrimination
Additional resources (2)
Practice Questions (6)
- Consumer surplus is defined as?
- What happens to consumer surplus when the market is not at equilibrium?
- A technological advancement leads to a significant increase in the efficiency of production for a particular good. What is the likely effect on consumer surplus?
- In international trade, which of the following statements accurately describes the impact on consumer surplus?
- What happens to consumer surplus when tariffs are imposed?
- Which of the following describes the concept of consumer surplus in international trade?
Resources
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