Consumer Surplus

Consumer surplus is a concept of economy which refers to difference between the amount which consumer is willing to pay for a product or service and the amount which the consumer actually pays for a product or service. For example If you are passing through a showroom and see mobile and you think that I will be happy if the price of mobile is $150, and you go inside the showroom and ask the price of mobile and you come to know that it is $120 than your consumer surplus would be $30.

Consumer of a good or service will buy that good or service for which his or her consumer surplus is the highest. So if you are very thirsty and searching for water, and you are given an option either to choose between glass of water and expensive mobile then you will go for glass of water as at that point of time, the your consumer surplus for that glass of water is greater than a mobile.

Similar to consumer surplus is producer surplus where producer surplus is the difference between the amount at which producer of a good is willing to supply the good and the actual price which the producer of a good gets from the consumer for the sale of a good or service.

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