1. Consumer Surplus
AP Micro 9/5/17

2. Warm Up How much are you willing to pay for a movie ticket?
Now what if I told you it costs $10? Is your willingness to pay higher than the actual price?

3. Consumer Surplus
Willingness to pay: the max price you would buy a good for
Consumer Surplus: the benefits from being able to purchase a good
In other words: the difference between how much you are willing/able to pay vs. how much you ACTUALLY paid
Example: buying used textbooks

4. Consumer Surplus Suppose books are now $20:
1. Calculate total consumer surplus:
The rule: As price falls, consumer surplus increases (the area under the curve and above the price increases)

5. Consumer Surplus
2. Suppose price increases to $40. Calculate the consumer surplus.
The rule: As price rises, consumer surplus decreases.

6. Casey’s Willingness to Pay Josey’s Willingness to Pay
Consider the market for cheese-stuffed jalapeno peppers. Use the table:
a. Construct the demand schedules (each person’s) for peppers for prices of $0.00, $0.10, and so on, and
b. Calculate the total consumer surplus when the price of a pepper is $0.40.
Quantity of Peppers
Casey’s Willingness to Pay
Josey’s Willingness to Pay
1st pepper
$0.90
$0.80
2nd pepper
0.70
0.60
3rd pepper
0.50
0.40
4th pepper
0.30

7. Casey’s consumer surplus = 0.50 + 0.30 + 0.10
Price of pepper
Quantity demanded by Josey
Quantity demanded by Casey
Total quantity of peppers demanded
$0.90 1
0.80 2
0.70 3
0.60 4
0.50 5
0.40
0.30 8
0.20
0.10
0.00
Casey’s consumer surplus =
Josey’s consumer surplus =
Total consumer surplus= $ $0.60 = $1.50

8. Consumer Surplus on a Demand Graph
Consumer surplus is the area located above the equilibrium price and below the demand curve graph
Since it creates a triangle, we can find the total consumer surplus by using the area of a triangle formula (A= 1/2 *b*h)

9. Graphing Consumer Surplus
When looking at a graph that includes demand and supply, consumer surplus is still the area located above the equilibrium price and below demand.

10. Changing Prices and Consumer Surplus
When a price is increased, consumer surplus falls.
Ex) If the price of a text book goes from $20 to $30.
This is because the area under the demand curve is decreased
When a price is decreased, consumer surplus rises.
This is because the area under the demand curve gets larger