BSTECHM, INC.

CONSUMER
SURPLUS
PRESENTED BY: ADRIAN A. SALIMBOT
OBJECTIVES

Explain the concept of consumer surplus.

Demonstrate how to calculate consumer surplus.

Illustrating consumer surplus on a graph.

 CONSUMER SURPLUS
Consumer's gain from exchange

Consumer Surplus is the difference between the

price that a consumer is willing to pay for a good or
service and the actual price that they have to pay in
the market.

A consumer is willing to pay a maximum price to

purchase one unit of a commodity in the market.
 CONSUMER SURPLUS
Consumer's gain from exchange

When the price of a product or service changes, the consumer surplus can also change.

Price increase: If the price of a product or service increases, the consumer surplus
decreases.

Price decrease: If the price of a product or service decreases, the consumer surplus
increases.

No change in price: If the price of a product or service remains the same, the
consumer surplus will also remain the same.
 CONSUMER SURPLUS
Consumer's gain from exchange

Consumer surplus is affected by a variety of factors, including:

1. Consumer preferences: The extent to which consumers value a product or service can
greatly impact their willingness to pay for it, and thus affect the consumer surplus.
2. Market competition: When there is more competition in a market, prices tend to be lower,
which can increase the consumer surplus.
3. Price elasticity of demand: If the demand for a product is very elastic, meaning that
consumers are very responsive to changes in price, then a small change in price can lead
to a large change in consumer surplus.
4. Income levels: Consumer surplus can be affected by consumers' income levels. For
example, a price reduction may result in a larger consumer surplus for lower income
consumers who were previously unable to afford the product.
5. Availability of substitutes: If there are many substitute products available, consumers
have more choice and bargaining power, which can increase consumer surplus.
6. Government policies: Government policies such as taxes, subsidies, and price controls
can affect the price of a product or service, which can in turn affect the consumer
surplus.
 CALCULATE
CONSUMER SURPLUS
Steps on how to calculate consumer surplus

Determine the demand curve: The demand curve represents the quantity of a product that consumers are
willing and able to buy at various prices.

Determine the market price: The market price is the price at which the product is sold in the market.

Determine the consumer's willingness to pay: The consumer's willingness to pay is the highest price they are
willing to pay for the product.

Calculate the consumer surplus: To calculate the consumer surplus, subtract the market price from the
consumer's willingness to pay.

Mathematically, the formula for consumer surplus is:

MAXIMUM
CONSUMER PRICE ACTUAL
SURPLUS WILLING PRICE
TO PAY
 CONSUMER SURPLUS
Example 1

Let's say you are willing to pay Php 500 for a movie ticket, but the actual price of the ticket is Php 360.

Consumer Surplus = Maximum price willing to pay - Actual Price

500 - 360 = 140

Php 140 is the Consumer Surplus

Example 2

You are willing to pay Php 1,000 for a new pair of shoes, but you find them on sale for Php 700.

1,000 - 700 = 300

Php 300 is the Consumer Surplus
 The area below the demand level and above the equilibrium price is the
consumer surplus (CS). While taking into consideration the demand and supply
curves, the formula for consumer surplus is
CS = ½ (base) (height).

500 Consumer Surplus

600
400

300

200

1 2 3 4

CS = 1/2 (4)(500-200)
CS = 1/2 (4)(300)
CS = 600
EXAMPLE:

CONCERT TICKETS

Total Consumer Surplus

2,700 dollars A = 1/2 (Base x Height)
A = 1/2 (90)(80-20)
A = 1/2 (90)(60)
A = 2,700
ILLUSTRATING CONSUMER SURPLUS
Consumer surplus can be illustrated on a graph by using the demand
curve and the market price.

Example: I have four signature shoes from a famous NBA player and I will sell it
to my friends.
 SIGE DAW!

MANGUTANA NA SIYA!
DILI NA SIYA MANGUTANA!
OPSS! BAWAL KA!
PANGUTANA NA MO!
+ 10 sa Langit ang DILI MANGUTANA!