![]() ![]() ![]() If a consumer is willing to pay more for a unit of a good than the current asking price, they are getting more benefit from the purchased product than they would if the price was their maximum willingness to pay. This reflects the fact that producers would have been willing to supply the first unit at a price lower than the equilibrium price, the second unit at a price above that but still below the equilibrium price, etc., yet they in fact receive the equilibrium price for all the units they sell.Ĭonsumer surplus is the difference between the maximum price a consumer is willing to pay and the actual price they do pay. ![]() Likewise, in the supply-demand diagram, producer surplus is the area below the equilibrium price but above the supply curve. This reflects the fact that consumers would have been willing to buy a single unit of the good at a price higher than the equilibrium price, a second unit at a price below that but still above the equilibrium price, etc., yet they in fact pay just the equilibrium price for each unit they buy. On a standard supply and demand diagram, consumer surplus is the area (triangular if the supply and demand curves are linear) above the equilibrium price of the good and below the demand curve. In the mid-19th century, engineer Jules Dupuit first propounded the concept of economic surplus, but it was the economist Alfred Marshall who gave the concept its fame in the field of economics. 2.3 Distribution of benefits when price falls.2.2 Calculation of a change in consumer surplus. ![]()
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