What is consumer surplus and how is it measured on a demand curve?

What is consumer surplus and how is it measured on a demand curve?

• A. The area under the supply curve and above the price.
• B. The area under the demand curve and above the price.
• C. The difference between what a consumer is willing to pay and what they actually pay; measured as the area above the price, below the demand curve, up to the quantities bought.
• D. The total expenditure by consumers.

Answer: (C)

Consumer surplus is the net benefit a buyer gets from paying a price lower than what they are willing to pay for each unit. On a demand curve, willingness to pay for a unit is the curve’s height, while the price is a horizontal line at the market price. The total surplus across all units bought is the sum of the per-unit differences: for each unit, how much more the buyer would have been willing to pay than what they actually pay. Graphically, this is the area between the demand curve and the price line, from the start up to the quantity bought. That makes the description focusing on the difference between willingness to pay and actual payment—the area above the price and below the demand curve up to the quantity purchased—the best way to express consumer surplus. The area under the supply curve above price represents producer surplus, and total expenditure is simply price times quantity, not surplus.

Consumer surplus is the net benefit a buyer gets from paying a price lower than what they are willing to pay for each unit. On a demand curve, willingness to pay for a unit is the curve’s height, while the price is a horizontal line at the market price. The total surplus across all units bought is the sum of the per-unit differences: for each unit, how much more the buyer would have been willing to pay than what they actually pay. Graphically, this is the area between the demand curve and the price line, from the start up to the quantity bought. That makes the description focusing on the difference between willingness to pay and actual payment—the area above the price and below the demand curve up to the quantity purchased—the best way to express consumer surplus. The area under the supply curve above price represents producer surplus, and total expenditure is simply price times quantity, not surplus.