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Consumer Surplus the Economic Measure

It is a consumer benefit’s measure of economic purpose. Such measure can be calculated by rationalizing and analyzing the difference between the ability to pay for products and services or are willing to spend which is relative to market price and what the customers actually spend on commodities and services. Consumer surplus can occur if customers are willing to pay more for a product than its present market price.

This is based on marginal utility economic theory. It states price or amount an individual is willing to pay for a specific product or service shows the utility that product or services give the consumer. Know more from our Consumer Surplus homework answers.

Measuring It with Demand Curve

Demand curve is used to graphically calculate and represent consumer surplus. It produces the relationship of a commodity’s price, and the amount of quantity demanded at said price. The quantity is drawn or placed on x-axis and price is kept on y-axis. Due to law of diminishing marginal utility, demand curve which is graphically represented happens to be downward sloping.

The area which is below the demand curve’s downward slope is measured for consumer surplus. It can also be measured by the amount of money a customer is willing to spend for a specific quantity and above actual goods’ market price which is shown by the horizontal line between demand curve and y-axis.

Consumer surplus is calculated on aggregate or individual basis. It depends on the fact that whether the demand curve is aggregated or individual. Consumer surplus increase when goods’ price falls and decreases when goods’ price rises. Order Consumer Surplus assignment answers for more.

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