Consumer Surplus

What is consumer surplus?

Consumer surplus is the consumer's gain from exchange. It's the difference between the maximum price that the consumer is willing to pay for a given quantity, and the market price the consumer actually has to pay. Total consumer surplus is the sum of the consumer surplus of all buyers.

For an example, let’s imagine you want to go to a concert and your ticket will set you back $20. But you’d be willing to pay up to $80. In other words, you’ve scored a deal!

The difference between the top price you’re willing to pay for that concert ticket and how much you actually pay is your consumer surplus. In this case, your consumer surplus is about $60. Not bad.

Your friend, on the other hand, doesn’t like this band nearly as much. She values the concert ticket at $30, so her consumer surplus for this good is much lower at about $10.

The consumer surplus is likely to be a little different for every other concert goer. On a graph, the total consumer surplus is the area beneath demand curve and above the price. In the video, we’ll show you what it looks like on a graph to add up all of the individual consumer surpluses for this particular market.

Interested in learning more about consumer surplus? Or what about diving into producer surplus? We cover these topics in detail in our Micro section on Supply, Demand, and Equilibrium.