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==Consumer Surplus==

==Consumer Surplus==

“Consumer surplus” is another powerful concept that illustrates the power of the free market as it drives down the price of goods.  When we buy goods and services, most of us would pay at a higher price if we had to.  For example, our families would pay twice the cost of milk because we would still want to drink milk even if the price were higher.  We may not buy as much milk at a higher price, but we would still buy some.  We get extra value when we can buy milk at a price lower than what we would really pay if we had to.

“Consumer surplus” is a concept that illustrates the power of the free market as it drives down the price of goods.  When we buy goods and services, most of us would pay at a higher price if we had to.  For example, our families would pay twice the cost of milk because we would still want to drink milk even if the price were higher.  We may not buy as much milk at a higher price, but we would still buy some.  We get extra value when we can buy milk at a price lower than what we would really pay if we had to.

The "consumer surplus" is the net benefit (in dollars) a consumer obtains from buying a good.  Thus (consumer surplus) = (total benefit) - (total cost).  The "consumer surplus" is never negative, because people would not purchase goods or services if their total benefit is less than their total cost.  They would be better off keeping their money and not making the purchase.

The "consumer surplus" is the net benefit (in dollars) a consumer obtains from buying a good.  Thus (consumer surplus) = (total benefit) - (total cost).  The "consumer surplus" is never negative, because people would not purchase goods or services if their total benefit is less than their total cost.  They would be better off keeping their money and not making the purchase.

The consumer surplus is the demand price (the most a consumer would pay) minus the price paid (the amount the consumer actually has to pay).  Suppose you were effusive (i.e., very enthusiastic) about a particular movie, and wanted very much to see it.  You were so excited that you were willing to pay $20 to see that movie.  But if the theater charges you only $8, then your consumer surplus is $20 - $8 = $12.

The consumer surplus is the demand price (the most a consumer would pay) minus the price paid (the amount the consumer actually has to pay).  Suppose you were effusive (i.e., very enthusiastic) about a particular movie, and wanted very much to see it.  You were so excited that you were willing to pay $20 to see that movie.  But if the theater charges you only $8, then your consumer surplus is $20 - $8 = $12.

Consumers stop buying a good when the demand price equals the price paid.  For movies, the demand price falls the longer it keeps playing in a theater.  After you’ve seen the movie once or twice, you’re not willing to pay so much to see it again.  Over time people stop paying to see the same movie, and the theater stops playing it and begins showing a new movie instead.

Consumers stop buying a good when the demand price falls slightly below the price paid.  For movies, the demand price falls the longer it keeps playing in a theater.  After you’ve seen the movie once or twice, you’re not willing to pay so much to see it again.  Over time people stop paying to see the same movie, and the theater stops playing it and begins showing a new movie instead.

Almost every time someone buys something, he benefits from the consumer surplus of that transaction because he would probably pay a little more than he did.  If you value a chocolate candy bar at $1.05 but can buy it for $1, then you acquired extra wealth of 5 cents as your consumer surplus.  You would have paid $1.05 for it, but paid only $1 and then had both the candy bar and the 5 cents.  You became wealthier from the transaction by an amount equal to your consumer surplus.  And you became fatter too!

Almost every time someone buys something, he benefits from the consumer surplus of that transaction because he would probably pay a little more than he did.  If you value a chocolate candy bar at $1.05 but can buy it for $1, then you acquired extra wealth of 5 cents as your consumer surplus.  You would have paid $1.05 for it, but paid only $1 and then had both the candy bar and the 5 cents.  You became wealthier from the transaction by an amount equal to your consumer surplus.  And you became fatter too!