consumer Surplus
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Transcript of consumer Surplus
![Page 1: consumer Surplus](https://reader036.fdocuments.us/reader036/viewer/2022080222/563dbc00550346aa9ab065f6/html5/thumbnails/1.jpg)
Demand, Marginal Benefit, and Consumer Surplus
• The demand curve reflects your willingness to pay - the maximum price that a person is willing to pay for a good
• A demand curve is a marginal benefit curve – the area under the D curve represents the total benefits from consumption
![Page 2: consumer Surplus](https://reader036.fdocuments.us/reader036/viewer/2022080222/563dbc00550346aa9ab065f6/html5/thumbnails/2.jpg)
P Qd
10 1
9 2
8 3
7 4
6 5
5 6
4 7
Demand & Consumer Surplus
P
Q
6
5
D
10
Demand reflects the maximum price consumers are willing to pay
![Page 3: consumer Surplus](https://reader036.fdocuments.us/reader036/viewer/2022080222/563dbc00550346aa9ab065f6/html5/thumbnails/3.jpg)
• How much value (benefit) does the consumer receive?
• Notice that total benefits are more than what you pay
P
Q
6
5
D
10
Demand & Consumer Surplus
![Page 4: consumer Surplus](https://reader036.fdocuments.us/reader036/viewer/2022080222/563dbc00550346aa9ab065f6/html5/thumbnails/4.jpg)
P Qd $ Paid Con Surplus
10 1 6 4
9 2 6 3
8 3 6 2
7 4 6 1
6 5 6 0
Total 30 + 10
Demand & Consumer Surplus
![Page 5: consumer Surplus](https://reader036.fdocuments.us/reader036/viewer/2022080222/563dbc00550346aa9ab065f6/html5/thumbnails/5.jpg)
Consumer Surplus
• Consumer surplus is equal to the difference between the buyer’s willingness to pay and the actual price paid
• Consumer surplus measures the net benefits from consumption
• If consumer surplus increases, then consumers are better off
![Page 6: consumer Surplus](https://reader036.fdocuments.us/reader036/viewer/2022080222/563dbc00550346aa9ab065f6/html5/thumbnails/6.jpg)
Consumer Surplus
P
Q
6
5
D
Amount paid ($30)
Consumer surplus is the area below the demand curve and above the market price ($10)
![Page 7: consumer Surplus](https://reader036.fdocuments.us/reader036/viewer/2022080222/563dbc00550346aa9ab065f6/html5/thumbnails/7.jpg)
How a change in Price affects consumer surplus
Quantity
Price
0
Demand
P1
A
B
Initialconsumersurplus
C
Q1 Q2
Supply
![Page 8: consumer Surplus](https://reader036.fdocuments.us/reader036/viewer/2022080222/563dbc00550346aa9ab065f6/html5/thumbnails/8.jpg)
How a change in Price affects consumer surplus
Quantity
Price
0
Demand
P1
P2
A
B
D
C
E
Q1 Q2
Initialconsumersurplus
Supply
S
Consumer surplus to new consumers
Additional consumer surplus to initial consumers
![Page 9: consumer Surplus](https://reader036.fdocuments.us/reader036/viewer/2022080222/563dbc00550346aa9ab065f6/html5/thumbnails/9.jpg)
Practical Utility of Consumer’s surplus
• Public Finance- Where the consumers are enjoying a surplus, there is a scope for taxation.
• Monopoly value- A monopolist will find that he can easily raise price of his product if the commodity is yielding surplus of satisfaction to the consumer.