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3 Cards in this Set
- Front
- Back
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Def of consumer surplus |
This is the difference between the maximum amount an individual is prepared to pay for a product and the actual price they pay. The higher the consumer surplus, the higher the consumer welfare and ability to buy a product. |
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Explain the graph |
The above diagram shows a consumer surplus, shaded above the market price, P1, and below the demand curve. This means that any individual who’s willing to pay a maximum price, P, and above will be Able to purchase the product. An individual prepared to pay price P will have a zero consumers surplus. While an individual prepared to pay above the price P, will have a positive consumers surplus. Any individual prepared to pay below price P will not be able to afford to pay the product and therefore will be cut from the market. |
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What happens to the Cs when the price changes |
When the price increases or decreases in the market, this will affect individual consumer surplus and the quantity of good a consumers will afford to pay. For example, an increase in the price of good will reduce consumers purchasing power. This will cause a fall in the consumer surplus |
