consumer surplus

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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 ?
2) In order to estimate consumers' surplus changes, the estimated demand curves are calibrated using the mean of 1934-1937 values for all variables, and then put into inverse form:
The authority takes over the clawback tax, but this is not entirely found in the final consumers' surplus (in the given example represented by hospitals and dialysis centers).
The welfare estimates based on both the consumers' surplus and the compensating variation approach tend to give similar costs of inflation.
A], will be built by the consumers' surplus of the country A, [C.
According to Mules and Dwyer (2005), only the consumers' surplus of local residents who attend the event are relevant.
Under RPP the firm can increase its profit since the price burden is shared between the parties (caller and receiver), the social welfare under RPP is always higher although consumers' surplus does not necessarily increase under the RPP.
NS] leads to the conclusion that in this particular case the total quantity purchased under segmentation will be larger than without segmentation, thus yielding higher profits to producers and sellers, larger consumers' surplus, and a higher level of social welfare.
In turn, social surplus can be divided into one third consumers' surplus and two-thirds producers' surplus.
After all, such efforts could only raise the price that a profit-maximizing monopolist would charge and would lower consumers' surplus value.
The Consumers' Surplus of Party members is area A and the Consumers' Surplus of Others is B.
2] each; the resulting consumers' surplus is equal to
Therefore, from trade liberalisation perspective, the study reveals that losses to producers surplus had been greater than benefits in consumers' surplus due to government interventions and it trade liberalisation was introduced in the domestic economy, it would have incurred greater gains to Basmati rice producers than losses to consumers.