CONSUMERS SURPLUS Meaning and
Definition
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Consumer surplus is a term used in economics to describe the economic benefit or surplus that consumers receive when purchasing a good or service at a price lower than what they are willing to pay. It is the difference between what consumers are willing to pay for a particular product and the actual price they pay for it.
Consumer surplus reflects the additional satisfaction that consumers derive from a purchase. It comes about due to the fact that consumers have different levels of willingness to pay for a specific good or service. Some consumers may be willing to pay a high price for an item, while others may only be willing to pay a lower price. The difference between the price consumers are willing to pay and the price they actually pay is the consumer surplus.
This surplus arises for a variety of reasons. One reason is that consumers may have different preferences and tastes, and thus, value the same product differently. Additionally, consumers may have different levels of income and willingness to pay, leading to different price perceptions and consumer surpluses. Moreover, consumer surplus can also occur due to market imperfections, such as monopolies, where prices are set higher than the cost of production, enabling the firm to extract more consumer surplus.
Consumer surplus is an essential concept in measuring the welfare or economic well-being of consumers. It indicates the gain in consumer utility or satisfaction resulting from enjoying a product or service at a lower price. Policymakers and economists use the concept of consumer surplus to evaluate the impact of price changes, taxes, subsidies, or other interventions on the welfare of consumers.
Common Misspellings for CONSUMERS SURPLUS
- xonsumers surplus
- vonsumers surplus
- fonsumers surplus
- donsumers surplus
- cinsumers surplus
- cknsumers surplus
- clnsumers surplus
- cpnsumers surplus
- c0nsumers surplus
- c9nsumers surplus
- cobsumers surplus
- comsumers surplus
- cojsumers surplus
- cohsumers surplus
- conaumers surplus
- conzumers surplus
- conxumers surplus
- condumers surplus
- coneumers surplus
- conwumers surplus
Etymology of CONSUMERS SURPLUS
The term "consumers surplus" was coined by Alfred Marshall, a British economist, in his book Principles of Economics, published in 1890. The word "surplus" refers to the excess or additional amount of something, while "consumer" pertains to the individuals or households who utilize goods and services.
Marshall used the concept of consumers surplus to explore the relationship between the price of a good or service and the satisfaction or utility derived from it. He observed that consumers are willing to pay a certain price for a product based on the satisfaction they expect to obtain from consuming it. However, in many cases, they are able to purchase the item at a lower price, resulting in a surplus of satisfaction or utility.
The word "consumers" emphasizes the focus on the individuals who consume or use goods and services, while "surplus" highlights the additional value or benefit that consumers gain beyond what they actually pay for.
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