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 ?
The Spokesperson stated that the United States imported low-cost, labor-intensive products from China in large quantities, which considerably lowered the consumption costs for US consumers, increased consumers' surplus. This in fact improved consumers' welfare and also helped the US to curb inflation in the larger sense.
Consumers' surplus calculation and integration with transport models," Working Paper, 2014.
With fixed costs and a break-even constraint describing a public university, tuition and subsidy structures are endogenously determined that maximize constrained welfare, defined as students' value (net consumers' surplus) minus the taxpayer appropriation.
The welfare estimates based on both the consumers' surplus and the compensating variation approach tend to give similar costs of inflation.
The welfare of the country A, [W.sub.A], will be built by the consumers' surplus of the country A, [C.sub.SA]; the producers' surplus in the country A, n [[PI].sub.A]; plus the tributary tax collection [t.sub.A] [Z.sub.A], minus the total disutility times the polluting emissions in the country A, [phi][Z.sub.A], then,
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.
An increase in the access charge decreases the total consumers' surplus; however, it also increases the profit of the incumbent service provider with ownership of the essential facilities.
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.
"Consumers' Surplus and Index-Numbers." The Review of Economic Studies 9:126-37.
This means that the buyers enjoy an increase in their consumers' surplus effected by their bargaining power.(21)