consumer surplus

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The excess of the benefit a consumer gains from purchase of a good over the amount paid for the good. An individual demand curve shows the valuation put by a consumer on successive units of a good. Goods whose value to the consumer is higher than their price are bought; purchasing stops when their marginal utility is equal to their price times the marginal utility of money. Consumer surplus can be measured by the area below the demand curve but above the price. Individual consumer surpluses from purchase of the same good can be aggregated for the market as a whole. Total consumer surplus from purchase of two or more differentiated goods, in general, is not well-defined unless the marginal utility of income is constant.

Consumer Surplus

Subjects: Economics.

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