What is consumer surplus and how is it calculated on a demand curve?

What is consumer surplus and how is it calculated on a demand curve?

• A. The total value consumers place on all units purchased.
• B. The area under the demand curve up to the quantity purchased.
• C. The area between the demand curve and the price paid, up to the quantity purchased.
• D. The price paid by consumers for all units purchased.

Answer: (C)

Consumer surplus is the extra benefit you get when you pay a price lower than what you would be willing to pay for each unit. On a demand curve, the height shows the maximum price a consumer would pay for each unit, while the market price is the actual amount paid for every unit. The surplus for all units is the area between the demand curve and the price line, from zero up to the quantity bought. This geometric area represents the total extra value consumers receive. The area under the demand curve up to the quantity would equal total willingness to pay, not surplus, and the price paid for all units is just the amount spent, not the extra benefit.

Consumer surplus is the extra benefit you get when you pay a price lower than what you would be willing to pay for each unit. On a demand curve, the height shows the maximum price a consumer would pay for each unit, while the market price is the actual amount paid for every unit. The surplus for all units is the area between the demand curve and the price line, from zero up to the quantity bought. This geometric area represents the total extra value consumers receive. The area under the demand curve up to the quantity would equal total willingness to pay, not surplus, and the price paid for all units is just the amount spent, not the extra benefit.