How to calculate the consumer surplus?
Understand the Problem
The question is asking how to determine the consumer surplus, which is the difference between what consumers are willing to pay for a good or service versus what they actually pay. This typically involves the understanding of demand curves and the area below the demand curve and above the price level.
Answer
Consumer surplus = Area under the demand curve above the price level up to the quantity purchased.
The final answer is consumer surplus is calculated as the area between the demand curve and the price consumers actually pay, from zero to the quantity purchased.
Answer for screen readers
The final answer is consumer surplus is calculated as the area between the demand curve and the price consumers actually pay, from zero to the quantity purchased.
More Information
Consumer surplus is a measure of the economic benefit that consumers receive when they are able to purchase a product for less than the maximum price they are willing to pay. It represents the difference between the total amount that consumers are willing to pay and the total amount they actually pay.
Tips
A common mistake is confusing consumer surplus with producer surplus. Consumer surplus deals specifically with benefits to consumers, not producers.
Sources
- Investopedia - Consumer Surplus: Definition, Formula, and Example - investopedia.com
