Dr Choppara Bala Kotaiah

Andhra University
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Concept of Consumer Surplus

Dr Choppara Bala Kotaiah

9441996119
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From the table , we see that as the
consumption increase from 1 to 2
units, the marginal utility falls from
30 to 28. This diminishes further as
he increases consumption. Now,
•Marginal utility is the price the
consumer is willing to pay for that
unit.
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•The actual price of the unit is fixed.

In the figure, you can see that the X-axis
measures the amount of commodity,
while the Y-axis measures the price and
marginal utility. Further, MU represents
the marginal utility curve, sloping
downwards. This indicates that as the
marginal utility falls, the consumer
purchases more units of the commodity
and vice-versa.

In Fig. , the total utility is equal to

the area under the marginal
utility curve up to point Q (ODRQ).
However, for price = OP, the consumer
pays OPRQ. Hence, he derives extra
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utility equal to DPR which is consumer
surplus.
Limitations
1.It is difficult to measure the marginal utilities of different units of a
commodity consumed by a person. Hence, the precise measurement of
consumer’s surplus is not possible.
2.For necessary goods, the marginal utilities of the first few units are
infinitely large. Hence the consumer’s surplus is infinite for such goods.
3.The availability of substitutes also affects the consumer’s surplus.
4.Deriving the utility scale for prestigious goods like diamonds is very
difficult.
5.We cannot measure the consumer’s surplus in terms of money. This is
because the marginal utility of money changes as a consumer makes
purchases and his stock of money diminishes.
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