Last modified on March 19, 2008, at 22:24

Consumer surplus

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Consumer surplus is the net benefit a consumer obtains from buying a good. In supply and demand models, consumer surplus is represented as the value (price times quantity) captured above the price level but below the demand curve.

In a monopoly, the loss in total surplus (known as social loss) is from a reduction is the consumer surplus while producer surplus does not rise accordingly. However, if a monopoly can perfectly price discriminate the consumer surplus in the market will be zero, since the monopoly extracts all benefits — however, there will not be any deadweight loss and the market will be efficient.