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Wize University Microeconomics Textbook > Efficiency

Consumer Surplus

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Consumer Surplus

  • Consumer's Willingness to Pay - the maximum amount that a consumer will pay for a good (shown on demand curve).
  • Consumer Surplus - the amount a consumer is willing to pay for a good minus the amount they actually pay for it.


Consumer Surplus for Individuals

  • In the diagram below, if the actual market price right now is $4, then the consumer surplus for the first consumer is
    $6
    which we find by doing
    $10
    (willingness to pay) minus
    $4
    (actual price paid).
  • For the second person the consumer surplus is
    $3
    which we find by doing
    $7
    minus
    $4
  • For the third person the consumer surplus is
    $0
    which we find by doing
    $4
    minus
    $4



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Total Consumer Surplus at Equilibrium


Total Consumer Surplus= (Base) ⋅ (Height) ⋅ (12)\boxed{\text{Total\ Consumer\ Surplus} =\ (Base)\ \cdot\ (Height)\ \cdot\ (\frac{1}{2})}

In the diagram above, the total consumer surplus is
15 * (80-50) * 1/2
=
$225

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Example: Consumer Surplus

The willingness to pay for three consumers is provided below and the current market price of ice cream is $5. Find the total consumer surplus.

Consumer Willingness to Pay (Marginal Benefit)

Mary $12
Mike $6
Barbara $4


$8

Consumer surplus for Mary = 12 - 5 = 7
Consumer surplus for Mike = 6 - 5 = 1
Consumer surplus for Barbara = 0 (because she is not willing to buy the product)

Total Consumer Surplus = 7 + 1 = 8

Practice: Consumer Surplus

The price of a milkshake is $8 the quantity demanded is 100 units. If the price rises to $9, the consumer surplus will:
Extra Practice
Consumer Surplus
A house in the most desirable section of town is listed for sale at a price of $345,000. Diane and her husband agree that they will pay no more than $340,000. Their bid is accepted at $339,500 and they purchase the house. They obtain a consumer surplus of
Suppose there is a downward sloping demand curve for chocolate and at a price of $5 the quantity demanded is 200 chocolates. When the price rises to $6, what will happen to consumer surplus?
Practice: Consumer Surplus
When the price of a milkshake is $8 the quantity demanded is 100 units. If the price rises to $9, the consumer surplus will:
Practice: Market Efficiency Advanced

The chart below shows the market for frog's legs.
The equilibrium point is 80 pounds at price of $15 per pound. Suppliers want to raise the price to $18 per pound which will also reduce the quantity in pounds.