How do you calculate consumer surplus?
If you'd pay up to $150 for a concert ticket but buy it for $100, your consumer surplus is $50. For a whole market, it's the triangle below the demand curve and above the market price. Producer surplus is the area above the supply curve and below price; competitive equilibrium maximizes their sum, which links to Pareto efficiency.
How do taxes and price discrimination change surplus?
A tax shrinks the quantity traded; part of the lost surplus becomes government revenue and part simply vanishes—deadweight loss. Firms use price discrimination—student discounts, surge pricing, coupons—to turn consumer surplus into profit, and it works best when demand is inelastic.
FAQ
- Is bigger consumer surplus always better?
- It's better for buyers; economists focus on total surplus for society.
- What about free apps?
- Their price is zero, so they barely show up in GDP, but studies estimate very large consumer surplus.
Sources reviewed: 2026-10-25
References
- Marshall, A. (1890). Principles of economics. Macmillan.
- Mankiw, N. G. (2021). Principles of economics (9th ed.). Cengage.