What Is Consumer Surplus? How To Calculate It?

Consumer surplus is an economic concept measuring the excess benefit consumers receive when they are willing to pay more for a product than its market price.

To calculate consumer surplus, you can use a formula involving the actual price of the product and the price consumers are willing to pay.

Consumer surplus is based on several assumptions, including rational consumer behavior, diminishing marginal utility, perfect information, and stable preferences.

Understanding consumer surplus is crucial for assessing market efficiency, consumer satisfaction, pricing strategies, government policies, and international trade benefits.

Economists use consumer surplus in cost-benefit analysis to evaluate the impact of various policies and projects on consumer well-being, making it a vital economic concept.