Consumer Surplus?

[Poontos]

What is it? In terms of economics.

Thanks...

 

[Napalm381]

The sum of the differences between the price consumers would be willing to pay and the actual amount they pay.

For example: Consumer A is willing to pay 10 dollars for a good, Consumer B 9 dollar, and so on down to Consumer F at 5 dollars. If the price of the good is 5 dollars, the consumer surplus would be 5+4+3+2+1+0=15 dollars.

 

[vi edit]

napalm, are you by chance an Econ major?

just curious

 

[Regine]

Yeah, he is.

He keeps talking me into taking classes, too

 

[Poontos]

Yah, can he be trusted?

 

[Poontos]

What situation would there be no consumer surplus?

 

[Regine]

I dunno, he helped me the last time, and I got part of the problem wrong

He's right about this though

 

[Poontos]

Apparently, my teacher invented the "Landerian flip-flop theory", ever heard of it?

 

[Regine]

Napalm here-
If the purchase price was equal to all of the consumers reservation price (for example, in the case of completely elastic demand), there would be no consumer surplus.

 

[Poontos]

So, if consumers were willing to pay $40 at the MOST for a peice of a$$, and the actual price was $40, there would be no consumer surplus? Am I on the right track here?

 

[Regine]

Yup, you're on the right track. Do you know how to find consumer surplus using a price-quantity diagram?

What a deal on that ass, BTW

 

[Futuramatic]

if the price was in the MIDDLE of the range of prices peeps were willing to pay, then I think you would be close to no surplus (I think).

 

[Poontos]

How the heck do they find this out? Do they survey people or something?

 

[Poontos]

^^

 

[Napalm381]

They compile economic data and attempt to correlate it to theoretical models. Where do they get the data? Information on sales from companies and similar research are probably the most likely sources.