Saturday, July 28, 2018

Consumer surplus

Students at Iba is willing to pay₹x for a facility, but has to pay only x-y for that facility, y being positive, then y is consumer surplus.
Students that does not pay ₹x-y or are willing  to pay less than that does not get that facility. Consumer surplus will be an area on the diagram bordered by
Demand curve, price axis and price  level.
When there is a rise in the cost of production, supply curve shift upward, consumer surplus shirk. The difference between the above area represents the fall in consumer surplus. When the cost of production is reduced, there is a rise in consumer surplus.

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