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| Name | How to Calculate Consumer Surplus |
| Video Uploader | Video From Free Econ Help |
| Upload Date | This Video Uploaded At 16-09-2011 23:06:06 |
| Video Discription | 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/what-is-consumer-surplus-and-how-to.html 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_confirmation=1 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 0hBIwRqTwmY |
| Category | Education |
| Tags | consumer | surplus | consumer surplus | willingness to pay | producer surplus | economic surplus | deadweight loss | how to calculate consumer surplus | how to find consumer surplus | consumer surplus formula | consumer surplus example | consumer surplus equation | consumer surplus explained | consumer surplus economics example | consumer surplus area | WTP minus price | consumer surplus triangle | how to solve consumer surplus | what is consumer surplus | consumer surplus examples | total surplus |
