Consumer Surplus Summary

Definition of Consumer Surplus

• The difference between what people are willing to pay and what they actually pay for a good.

Concept of Surplus

• Surplus indicates an abundance of benefit received compared to payment made.

Example

• Willingness to pay: $500 for a movie ticket.
• Actual price paid: $20.
• Consumer surplus = $500 - $20 = $480.

Economic Implications

• Graphically represented by the area between the demand curve and the equilibrium market price.
• Reflects additional benefit consumers gain from purchasing at market price rather than their maximum willingness to pay.