1. What is Consumer Surplus?

Consumer Surplus is the difference between what consumers are willing to pay for a good or service (their maximum price) and what they actually pay (the equilibrium price). It represents the economic benefit to consumers from participating in the market.

2. How Does the Calculator Work?

The calculator uses the Consumer Surplus formula:

Where:

• \( P_{max} \) — Maximum price consumers are willing to pay (dollars)
• \( P_{equilibrium} \) — Actual market equilibrium price (dollars)
• \( Q \) — Quantity sold at equilibrium (units)

Explanation: The formula calculates the area of the triangle between the demand curve and the equilibrium price line.

3. Importance of Consumer Surplus

Details: Consumer surplus is a key measure of economic welfare and market efficiency. It helps economists evaluate the benefits consumers receive from market transactions and assess the impact of policies like taxes or price controls.

4. Using the Calculator

Tips: Enter the maximum price consumers are willing to pay, the actual equilibrium price, and the quantity sold at equilibrium. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What does a higher consumer surplus indicate?
A: A higher consumer surplus indicates greater economic benefit to consumers, typically resulting from lower market prices or increased willingness to pay.

Q2: Can consumer surplus be negative?
A: No, consumer surplus cannot be negative as it represents the area above the price and below the demand curve, which is always non-negative.

Q3: How does elasticity affect consumer surplus?
A: More elastic demand curves (flatter) typically result in smaller consumer surplus, while inelastic demand (steeper) creates larger consumer surplus.

Q4: What happens to consumer surplus when price decreases?
A: Consumer surplus increases when price decreases, as the area between the demand curve and price line expands.

Q5: Is consumer surplus the same as profit?
A: No, consumer surplus measures consumer benefit, while profit measures producer benefit. Together they make up total economic welfare.