A product's market price results from a balance between the interests of producers and consumers, and at this equilibrium, consumers buy a certain quantity of the item. These consumers would willingly pay more for the item it they had to, although they would buy fewer of them. Consumer surplus describes the benefit to the consumer of buying the product at a price lower than the maximum rate they would pay. Separately, producers experience a surplus as well because the market price exceeds the minimum price they would offer.
Subtract the market price from the maximum price that consumers would pay for a product. For example, if the market price for a car is $20,000, and consumers would continue to buy some of the cars if they were priced at $38,000, then calculate $38,000 - $20,000 to get $18,000.
Multiply this price difference by the number of units that consumers buy. For example, if consumers by 500 of these cars then multiply $18,000 by 500 to get $9 million.
Divide the answer from Step 2 by two to get $4.5 million. This is the consumer surplus on the sale of the cars.
- On a graph, consumer surplus is a triangular area; the price change is its base, and the quantity is its height. Divide the value from Step 2 by two to find consumer surplus because a triangle's area is half the product of its height and base.
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