Consumer Surplus Consumer surplus is the difference between what the consumer would be willing to pay to purchase a given quantity of a good and what the consumer actually pays to purchase a given quantity of a good. The height of the demand curves shows the most the consumer would pay to purchase a given unit of the good. The area under the demand curve shows the most the consumer would pay to purchase a given quantity of the good. The consumer pay an amount equal to the price times quantity. Total consumer expenditures are measured by the area under the price.
Consumer surplus is the area under the demand curve and above the price.
The existence of consumer surplus provides managers with an opportunity to increase total revenues by extracting some of the consumer surplus. Demonstration Problem 2-2 Supply Supply Defined Supply is the relationship between price and quantity supplied, other factors affecting the quantity supplied held constant. A market supply curve is the graphical depiction of the price-quantity supplied relationship. The law of supply holds that there is a direct relationship between price and quantity supplied. Distinguishing between the effects of changes.