consumer surplus Flashcards
define consumer surplus
consumer surplus occurs when the price a consumer is willing to pay for a good is lower than the actual price they have to pay for it. it is the difference between what the max price the consumer is willing to pay an the market price
how do you calculate consumer surplus
by calculating the area below the demand curve above the equilibrium price (demand curve should touch the price axis)
how to calculate change in surplus
final surplus- initial surplus even if the final surplus is less than the initial. the minus surplus indicates a loss of surplus
what causes a change in consumer surplus
a shift of the SUPPLY CURVE is directly associated with CONSUMER SURPLUS (change in demand causes a change in max price consumer is willing to pay so the entire area of surplus gets transformed vertically up/down so the change in quantity determines whether there is a change in surplus)
