Consumer surplus
Definition. Consumer surplus is the difference between the maximum price a consumer is willing to pay for a good and the price they actually pay. On a demand and supply diagram it is the area below the demand curve and above the market price, up to the quantity bought, and it measures the welfare consumers gain from a transaction.
It rises when the price falls or demand increases, and a price rise, a binding price floor, or a tax reduces it. With producer surplus it makes up the total welfare in a market.
This term belongs to Consumer and Producer Surplus in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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