economics terms

Consumer Surplus

Only the marginal consumer is willing to pay just the market price in a typical supply and demand equilibrium.  The consumers would be willing to pay more than the market price are what makes the demand curve slope downward.  The amount that these consumers would be willing to pay, but do not have to pay is known as the consumer surplus.

The diagram below is borrowed from Who Pays a Sales Tax?, which applies this concept.


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Economics Terms

Arbitrage Pricing
Arbitrage Profit
Average Cost
Balance of Payments
Budget Constraint
Call Option
Concave Function
Consumer Surplus
Consumption Function
Convex Function
Deadweight Loss
Demand Curve
Econometrics
Economic Agent
Economic Model
Economics
Economics Textbook
Elasticity
Endogenous
Endogenous Technical Change
Equilibrium
Exchange Rate
Exogenous
Expectations Hypothesis
Federal Funds (Fed Funds) Rate
Fixed Exchange Rate
Floating Exchange Rate
Frictional Unemployment
Gross Domestic Product (GDP)
Income Effect
Income Elasticity
Indifference Curve
Interest Rate
Intertemporal Substitution
Jensen's Inequality
Macroeconomics
Marginal Cost
Marginal Product
Marginal Utility
Microeconomics
Monopoly
Optimizing Behavior
Perfect Competition
Phillips Curve
Price Elasticity
Producer Surplus
Production Function
Production Possibility Frontier
Put Option
Recession
Reservation Wage Rate
Risk Aversion
Structural Unemployment
Substitution Effect
Supply Curve
Taylor Rule
Technological Growth
Term Structure
Theory of the Consumer
Theory of the Firm
Unemployment Rate
Utility Function
Velocity of Money
Widget
Yield Curve