ECON1101 - Consumer Surplus

Consumer Surplus is the difference between a buyer's reservation price for a good and the market price (the price they actually pay for it).

It's a quantitative measure of the amount by which buyers benefit as a result of their ability to purchase goods and services.

It can be used to measure the effect to consumer welfare of changes in markets .

Calculating Consumer Surplus

Take the area between the Demand Curve, the Supply Curve and the market price. This is the consumer surplus. (Upper and Lower bounded by demand/price, left bounded by axis, right bounded by Supply).

If a product can be sold in only whole-number amounts then the ceiling price curve will be a stair case.