Livestock Economics, Marketing and Business Management

CONSUMER'S SURPLUS

• Consumer's surplus is based on diminishing utility.
• Concept of consumer surplus is defined as the excess of price, which a person would be willing to pay rather than go without the good.
• In short Consumer's surplus is what we are prepared to pay minus what we actually pay or it is the difference between total utility and the amount spent. (Click to view graph)

Consumer's surplus = Total Utility-Total price

No.of eggs (1)	Price (Rs) (2)	Total Cost (3)	Total utility (4)	Marginal utility (5)	Consumer's surplus (6) = (4 - 3)
1	25	25	100	--	75
2	25	50	175	75	125
3	25	75	225	50	150
4	25	100	250	25	150

• Consumer is prepared to pay OMPD for four eggs but as a buyer in the market, he pays only OMPK.
• Hence the consumer's surplus is given by OMPD - OMPK = DKP (selected area)