Consumer Surplus

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DEFINITION of 'Consumer Surplus'

An economic measure of consumer satisfaction, which is calculated by analyzing the difference between what consumers are willing to pay for a good or service relative to its market price. A consumer surplus occurs when the consumer is willing to pay more for a given product than the current market price.

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BREAKING DOWN 'Consumer Surplus'

Consumers always like to feel like they are getting a good deal on the goods and services they buy and consumer surplus is simply an economic measure of this satisfaction. For example, assume a consumer goes out shopping for a CD player and he or she is willing to spend $250. When this individual finds that the player is on sale for $150, economists would say that this person has a consumer surplus of $100.

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RELATED FAQS
  1. For what purpose is the consumer surplus figure used?

    The consumer surplus figure is used by companies that seek to maximize revenue and profits by minimizing consumer surplus, ... Read Full Answer >>
  2. Why are economists interested in the consumer surplus?

    Economists are interested in consumer surplus because it measures economic welfare, plays a large part in changing market ... Read Full Answer >>
  3. What profit margin is average for a company in the electronics sector?

    Many industries practice price discrimination, including the entertainment industry, the consumable goods industry and the ... Read Full Answer >>
  4. What are the different types of price discrimination and how are they used?

    Price discrimination is one of the competitive practices used by larger, established businesses in an attempt to profit from ... Read Full Answer >>
  5. What is the difference between consumer surplus and economic surplus?

    The consumer surplus is the difference between the highest price a consumer is willing to pay and the actual market price ... Read Full Answer >>
  6. What does it signify about a given product if the consumer surplus figure for that ...

    High consumer surplus for a particular product signifies a high level of utility for consumers and may carry some implications ... Read Full Answer >>
  7. Can scarcity and surplus coexist together?

    Scarcity and surplus can exist together in the same market, but it requires active intervention to create this condition. ... Read Full Answer >>

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