Consumers’ surplus is a measure of consumer welfare and is defined as the excess of social valuation of product over the price actually paid. It is measured by the area of a triangle below a demand curve and above the observed price.

What do you mean by consumer surplus?

Consumers’ surplus is a measure of consumer welfare and is defined as the excess of social valuation of product over the price actually paid. It is measured by the area of a triangle below a demand curve and above the observed price.

What is consumer surplus and why is it important?

Consumer surplus reflects the amount of utility or gain customers receive when they buy products and services. Consumer surplus is important for small businesses to consider, because consumers that derive a large benefit from buying products are more likely to purchase them again in the future.