Consumer's Surplus

Consumer’s surplus is defined by difference between what a consumer is willing to pay for a good and the amount actually paid. Different consumers place different values on the consumption of particular goods, the maximum amount they are willing to pay for those goods also differs. Individual consumer surplus is the difference between the maximum amount that a consumer is willing to pay for a good and the amount that the consumer actually pays. Suppose, for example, that a buyer would have been willing to pay Rs. 250 for a famous book even though she only had to pay Rs 210. The Rs. 40 difference is her consumer surplus. When we add the consumer surpluses of all consumers who buy a good, we obtain a measure of the aggregate consumer surplus.