Consumer Surplus

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    Consumer Surplus

    • In almost every market situation, there will always be some individuals who are willing to pay above what they actually have to pay to satisfy their demand
    • However, consumers pay the price offered, and no the price that they’re willing to pay, and so potentially save some money.
    • This is known as consumer surplus
    • For the cinema trip scenario, the consumer would be willing to pay £4 for the first cinema trip, but the actual price of tickets is £1.50
    • This means that the consumer receives a surplus of £2.50 (£4 – £1.50)
    • When the demand is 5 trips per moth, the consumer will receive a surplus of £5.05 ((£4 – £1.50) + (£3 – £1.50) + … etc…)

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