consumer surplus

(redirected from Consumer's Surplus)
Also found in: Dictionary, Acronyms, Wikipedia.
Consumer surplusclick for a larger image
Fig. 25 Consumer surplus.

consumer surplus

a difference between the price the consumer is actually required to pay for a product compared to the price the consumer would be prepared to pay. In Fig 25, which shows a downward-sloping demand curve for a product, the price charged is indicated by P. The shaded area above P represents the consumer surplus. To illustrate: you are a Manchester United Football fan; tickets for a home game are currently priced at £50 but you would be willing to pay £75. Hence you have ‘received’ as a consumer a ‘perceived benefit’ or ‘surplus’ of £25 over and above the price actually charged.

Business strategists can use the concept of the consumer surplus to increase the firm's profits and COMPETITIVE ADVANTAGES over rival suppliers (see VALUE CREATED MODEL). For example, in the case of Manchester United instead of charging a single price of £50 it could segment its market, charging different prices for admission to different parts of the ground. (See PRICE DISCRIMINATION, MARKET SEGMENTATION) in order to ‘capture’ more of the consumer surplus for itself. Thus, it could continue to charge the ‘basic’ price of £50 for admission to certain parts of the ground; £75 for seating in the main stand and £120 for an ‘executive box’ seat. Similarly, BSkyB the television broadcaster offers subscribers not only a basic ‘variety’ package of some 75 channels but other extra pay channels such as Sky Sports 1,2 and 3 and the movie channel.

References in periodicals archive ?
the social surplus (SS) is the sum of the consumer's surplus and the producer's surplus: SS = CS + PS;
79 and the welfare cost of inflation is measured using consumer's surplus approach of calculating the area under the money demand curve.
4) into Equation 22, we achieve the consumer's surplus for the variable market size under mill pricing, uniform pricing, and discriminatory pricing, respectively, as
The assumption of no income effect enables one to use the consumer's surplus as an exact measure of the excess amount a consumer would be willing to pay over the variable payment, pq, which he makes under the twopart tariff.
When crossed in one direction, the result is entrenched monopoly and reduced consumer's surplus.
The increase in wholesale price of rice in Pakistan and resultantly decrease in quantity demanded would have caused a loss of consumer's surplus of Rs 2690 million.
In the fifth part I discuss some implications of the model for consumer's surplus and welfare.
The traditional travel cost method has been useful for measuring consumer's surplus (although, see Randall 1994), but only for historical data.
Then consumer's surplus, due to a MC firm facing constant elasticity demand, will be at least as large as the firm's gross profit.
Consumer's surplus for households located at r, s(r), is given by (4) [Mathematical Expression Omitted] Overall consumers' surplus is (5) [Mathematical Expression Omitted] Welfare maximization implies maximization of [Pi] + S, which has been shown to required e = 1,(7) or marginal cost pricing.
Automotive Fuel Economy Improvements and Consumer's Surplus.
This eliminates the need for price and cost data because the objective becomes zero consumer's surplus loss instead of profit maximization.

Full browser ?