How to Calculate Consumer Surplus
491.2 هزار بار بازدید -
13 سال پیش
-
This movie describes what consumer
This movie describes what consumer surplus is, and how to calculate it with various changes in price, demand, and supply. More information can be found at: https://www.freeeconhelp.com/2011/09/...
To summarize consumer surplus is equal to the area underneath the demand curve but above the market price. Another way to think about it is WTP - market price but you have to do this very every possible transaction (hence the triangle). This area can be thought of as the "bonus income" to the consumers because they get to obtain the good or service they desire at a price much lower than their maximum willingness to pay (hence consumer "surplus"). All of them are super lucky and happy--except for one... but it is still a voluntary transaction!
Please comment below, I love when you find something helpful or if you have questions or criticism please feel free to share!
Also, if you found this helpful remember to like and subscribe to freeeconhelp's channel: www.youtube.com/freeeconhelp/?sub_con...
Get Social:
***********************
Our website: www.freeeconhelp.com
Please like us on facebook at: www.facebook.com/freeeconhelp
Follow us on twitter: www.twitter.com/freeeconhelp
Below is a summary of the transcript for the video:
:03.310, :07.020
All right this movie is going to go over how to calculate consumer surplus
:07.020, :10.830
And what happens if we have some common changes in Consumer Surplus?
:11.590, :13.179
so first
:13.179, :16.438
consumer Surplus is easily calculated by
:17.619, :23.849
First drawing our typical graph with price and quantity and then measuring out our demand curve
:24.850, :30.930
So in order to calculate consumer Surplus we need this demand curve, and we need some price level
:32.980, :34.440
We'll call it P star
:34.440, :41.460
And then we need to know what this p upper limit is - because we need these numbers in order to calculate
:41.8 , :43.270
Consumer surplus
:43.270, :48.329
So consumer surplus is the difference between what you're willing to pay
:48.610, :54.569
Which is how we construct this demand curve and what you actually have to pay so for each of these
:54.850, :59.399
Consumers that are willing to pay a lot more than the actual price they have to pay
1: .129,1:07.469
So it's that area between the demand curve and the price paid that's going to be our consumer surplus
1:08.140,1:09.909
and
1:09.909,1:16.559
As you can see as long as we have linear demand curves consumer Surplus is going to be a triangle
1:18.640,1:23.430
So you have to know how to calculate the area of a triangle and if you don't I'll tell you it's 1/2
1:24.4 ,1:26.110
base
1:26.110,1:28.110
Times height
1:29.479,1:34.419
so let's go through an example if we're given a
1:35.780,1:38.979
curve so we have our q and p and
1:39.649,1:42.399
Our demand and our price
1:43.369,1:48.519
so what if price is five this upper limit price is 10 and
1:49.310,1:51.519
Our equilibrium quantity is five
1:52.520,1:54.610
Okay, so our formula Says 1/2
1:55.850,2:01.899
Base times height well what's the base here the base goes from 0 to 5?
2:02.720,2:04.720
so our base is 5
2:04.849,2:11.919
What's our height goes from 5 to 10 so our height is also 5 so 5 times 5 is 25?
2:12.799,2:19.209
1/2 times 25 gives us 12.5. So our consumer Surplus would be equal to
2:20.780,2:22.780
12.5
2:23.390,2:29.199
Now let's switch it up a little bit. What if we change we shift this demand curve
2:31.940,2:35.380
So let's say that it now intersects at 8
2:36.980,2:38.980
and
2:39.139,2:44.379
Price is still at 5. So this is our demand curve before
2:46.609,2:48.470
5
2:48.470,2:54. 9
Let's call this 3. This is our demand curve before for some reason it shifts left
2:54.010,2:56.590
And this is our new consumer Surplus
2:57.560,3:03.729
How do we calculate the area of that well it's going to be 1/2 times Base 3
3:04.069,3:07.988
Times Height 3 so our new consumer Surplus is
3:09.139,3:15.039
going to be 4.5. So if they ask us to calculate the difference in Consumer Surplus
3:15.560,3:21.130
It's going to be 12 point 5 minus 4 point 5. What is that going to give us?
3:22.430,3:29.260
8 so really to solve these problems all you have to do is shift that curve know what the values are
3:31.190,3:36.939
Calculate the areas of the triangles and then subtract one from the other to find the difference
3:40.070,3:42.070
you can also
3:42.180,3:45.950
Have a situation where the price increases
3:47.490,3:49.490
So if you have Q and p
3:51.9 ,3:53.9
Let's do 10
3:54.480,3:56.480
That's our demand curve
3:56.910,3:58.910
we have a p of
3:59.310,4:01.110
5P star
4:01.110,4:06.230
Or equilibrium quantity is 5 we know what the area of that is but now let's increase
4:07.050,4:08.220
our
4:08.220,4:09.510
p
4:09.510,4:12.739
Star Star, we'll call it to 7
To summarize consumer surplus is equal to the area underneath the demand curve but above the market price. Another way to think about it is WTP - market price but you have to do this very every possible transaction (hence the triangle). This area can be thought of as the "bonus income" to the consumers because they get to obtain the good or service they desire at a price much lower than their maximum willingness to pay (hence consumer "surplus"). All of them are super lucky and happy--except for one... but it is still a voluntary transaction!
Please comment below, I love when you find something helpful or if you have questions or criticism please feel free to share!
Also, if you found this helpful remember to like and subscribe to freeeconhelp's channel: www.youtube.com/freeeconhelp/?sub_con...
Get Social:
***********************
Our website: www.freeeconhelp.com
Please like us on facebook at: www.facebook.com/freeeconhelp
Follow us on twitter: www.twitter.com/freeeconhelp
Below is a summary of the transcript for the video:
:03.310, :07.020
All right this movie is going to go over how to calculate consumer surplus
:07.020, :10.830
And what happens if we have some common changes in Consumer Surplus?
:11.590, :13.179
so first
:13.179, :16.438
consumer Surplus is easily calculated by
:17.619, :23.849
First drawing our typical graph with price and quantity and then measuring out our demand curve
:24.850, :30.930
So in order to calculate consumer Surplus we need this demand curve, and we need some price level
:32.980, :34.440
We'll call it P star
:34.440, :41.460
And then we need to know what this p upper limit is - because we need these numbers in order to calculate
:41.8 , :43.270
Consumer surplus
:43.270, :48.329
So consumer surplus is the difference between what you're willing to pay
:48.610, :54.569
Which is how we construct this demand curve and what you actually have to pay so for each of these
:54.850, :59.399
Consumers that are willing to pay a lot more than the actual price they have to pay
1: .129,1:07.469
So it's that area between the demand curve and the price paid that's going to be our consumer surplus
1:08.140,1:09.909
and
1:09.909,1:16.559
As you can see as long as we have linear demand curves consumer Surplus is going to be a triangle
1:18.640,1:23.430
So you have to know how to calculate the area of a triangle and if you don't I'll tell you it's 1/2
1:24.4 ,1:26.110
base
1:26.110,1:28.110
Times height
1:29.479,1:34.419
so let's go through an example if we're given a
1:35.780,1:38.979
curve so we have our q and p and
1:39.649,1:42.399
Our demand and our price
1:43.369,1:48.519
so what if price is five this upper limit price is 10 and
1:49.310,1:51.519
Our equilibrium quantity is five
1:52.520,1:54.610
Okay, so our formula Says 1/2
1:55.850,2:01.899
Base times height well what's the base here the base goes from 0 to 5?
2:02.720,2:04.720
so our base is 5
2:04.849,2:11.919
What's our height goes from 5 to 10 so our height is also 5 so 5 times 5 is 25?
2:12.799,2:19.209
1/2 times 25 gives us 12.5. So our consumer Surplus would be equal to
2:20.780,2:22.780
12.5
2:23.390,2:29.199
Now let's switch it up a little bit. What if we change we shift this demand curve
2:31.940,2:35.380
So let's say that it now intersects at 8
2:36.980,2:38.980
and
2:39.139,2:44.379
Price is still at 5. So this is our demand curve before
2:46.609,2:48.470
5
2:48.470,2:54. 9
Let's call this 3. This is our demand curve before for some reason it shifts left
2:54.010,2:56.590
And this is our new consumer Surplus
2:57.560,3:03.729
How do we calculate the area of that well it's going to be 1/2 times Base 3
3:04.069,3:07.988
Times Height 3 so our new consumer Surplus is
3:09.139,3:15.039
going to be 4.5. So if they ask us to calculate the difference in Consumer Surplus
3:15.560,3:21.130
It's going to be 12 point 5 minus 4 point 5. What is that going to give us?
3:22.430,3:29.260
8 so really to solve these problems all you have to do is shift that curve know what the values are
3:31.190,3:36.939
Calculate the areas of the triangles and then subtract one from the other to find the difference
3:40.070,3:42.070
you can also
3:42.180,3:45.950
Have a situation where the price increases
3:47.490,3:49.490
So if you have Q and p
3:51.9 ,3:53.9
Let's do 10
3:54.480,3:56.480
That's our demand curve
3:56.910,3:58.910
we have a p of
3:59.310,4:01.110
5P star
4:01.110,4:06.230
Or equilibrium quantity is 5 we know what the area of that is but now let's increase
4:07.050,4:08.220
our
4:08.220,4:09.510
p
4:09.510,4:12.739
Star Star, we'll call it to 7
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