Definition of Consumer Surplus

Consumer surplus is essentially a measurement of consumer satisfaction.

In the world of economics, consumer surplus is a simple but effective way to measure consumer satisfaction, an important indicator of the economy as a whole.

Definition

At its most basic, consumer surplus measures the gap between what consumers are willing to pay for a product and what they actually pay.

Application

If an individual is willing to pay $300 for a television and is able to buy it in the market for $250, that represents a consumer surplus of $50.

Origin

The concept of consumer surplus was first presented by economist Jules Dupuit as the term "relative utility," using it in his studies of public welfare in 1844.

Adaptation

Dupuit's original idea was adapted and developed by British economist Alfred Marshall (the first to use the term "consumer surplus"). Marshall's ideas were influential in economists' thinking about value and price.

Usefulness

The value of the concept of consumer surplus lies in its ability to let economists quantify consumer satisfaction, a trait that previously seemed ambiguous and undefinable.

References

• Consumer Surplus
• Economy Professor | Jules Dupuit
• Alfred Marshall: The Concise Encyclopedia of Economics