Surplus of the consumer is that such? What is the surplus of the consumer and the producer?

Often, for a particular product, we are willing to pay more than it actually costs, which is due to our natural needs and desires. Such our opportunities constitute a separate element in the structure of a healthy market, which we will talk about below.

What does the consumer need?

It is difficult to understand what the surplus consumer is, if one does not fully understand the driving force of this phenomenon-demand. Everybody knows from the economic theory that the latter is the basis of all market relations, because only thanks to him the proposal is generated, and, accordingly, the equilibrium of the circulation of the goods and services offered and consumed.

Do not hesitate to say that the market is driven by the consumer, which, in turn, when choosing a particular purchase is based on a number of factors.

Whoever said anything, but the primary driving force of the actions of any buyer - these are the preferred features. No one will ever acquire something that he does not need, so everyone rests on their personal needs.

At the second stage, the buyer maximizes the utility and rationality of his acquisition, in other words, brings his wishes closer to the equilibrium "price-quality" indicator.

Of course, here one can not do without comparing one's desires with one's own financial possibilities, and hence the following factor - the cost of a good or service in relation to the proposed substitute goods of other manufacturers.

Now we can answer the question posed earlier: the consumer needs a product that meets his both conscious and subconscious criteria, which are based on both conscious and subconscious factors.

How does the consumer usually behave?

So, we understand what the buyer's actions are based on, but how does it look in practice? Obviously, a potential buyer may be interested in an identical product from several sellers at the same time, but after buying it only from one or not to make a purchase at all. Why is this happening?

The fact is that often the wishes and needs of the buyer are rational, and each determines the degree of utility of an acquisition, both for himself and for his family members. In addition, each representative of demand has its own threshold of financial constraints, and if a particular commodity does not carry a first need, it is unlikely to be able to pay too high a price for it.

Often a consumer seeks a product at a lower cost, but that does not mean that it should be of poor quality. From here one can lightly run ahead and note that the surplus of the consumer is the sum of money, which is the difference between the price that the buyer was willing to pay and the one that he actually paid. In other words - I found an identical product of a lower value from another seller.

Consumer and market

Do not forget that the surplus consumer is primarily an element of the normal market, where there are also such components as demand and supply.

In accordance with the above information, it can be concluded that the desire and ability of the buyer to purchase a particular product or service for a certain period of time and represent a phenomenon of demand. The latter depends on a number of factors: socio-cultural and demographic indicators of the market, the level of earnings of the population, the quality of the proposed product, the products of competitors and its value.

In turn, demand interacts with the proposal, which also depends on various external socio-cultural factors, as well as on internal factors. The latter include the level of expected consumption and the competitiveness of goods on the market.

So what is this - consumer surplus?

Well, we gradually got close to the key concept of this article, around which, it can be said, various cause-effect market processes develop. So, consumer surpluses are as much money as you left in your pocket after a purchase, although you intended to spend it.

We all know from the foundations of the economic theory about the regularities of the utility level of a certain good for a unit of the population. So, for example, if you wanted an apple and you bought a kilo, then with each eaten fruit its utility for you will decrease in the rates of a negative arithmetic progression.

The maximum that you can pay for one eaten apple, for example, is 5 rubles, but do not forget that with each unit the price you offer will decrease. On the market, you are offered to buy goods at 2 rubles per fruit, and here the cumulative difference between your and the proposed price will be the surplus of the consumer. The formula for a more specific calculation of this indicator will be presented below. Well, for now, we'll figure out what this phenomenon can affect.

What profit can the consumer receive?

It should be noted that the surplus of the consumer is not only the amount of savings, it is primarily his own profit. To illustrate the example, let's draw a graph on which as the TU curve we depict the constantly changing level of utility of our apple, but the indicator C will talk about material costs, the straight line q will indicate the quantity of the goods. We see that the maximum level of utility coincides with the price only for a certain volume of demand (q ₀ ), and then the angle goes to a decline, which indicates that consumer surpluses, starting from this point, are growing.

Thus, we can conclude: the higher the indifference curve rises above the marked contact of indicators, the more profit the buyer will receive from the proposed transaction, and he will be able to meet his other needs for the funds received.

Surplus of the consumer against the background of the aggregate market

So, we learned how the difference between the expected and actually paid out amount of money for a particular product works on the example of a specific consumer. And now let's see how the consumer's surplus can look in the aggregate market. The graph below represents the price of our apples (P) along the vertical axis, and their number (Q) along the horizontal axis. In this case, the mark P ₀ indicates the level of the generally accepted market price of a fruit on average.

By analogy, we trace the utility curves along the price axis (for each consumer they will be individual) and determine the profit of each buyer in the form of shaded figures.

In a graphic image, everything is extremely simple and understandable - there is a certain figure, it is the sought-after indicator, but how to find the surplus of the consumer? The formula is quite simple: we need to calculate the area of each figure, and then summarize the results. The final figure and will be the total profit of buyers in the apples market as a whole.

Surplus of the consumer and the manufacturer

If we are talking about the behavioral factor of the buyer, it will not be advisable not to recall certain aspects of the seller's behavioral factors. Do not forget that the surplus consumer and producer - indicators are interrelated and, not afraid to mention, interdependent. The latter indicates the difference between the amount of money that the seller planned to receive from the transaction and actually earned.

On the chart below, line D indicates the price that the buyer is willing to pay, and the direct S indicates the cost that the manufacturer offers. At a certain point they intersect (the transaction is concluded), and the shaded triangles (upper and lower, respectively) indicate the benefit received by the consumer and the so-called costs from the seller's greater expectation.

How to achieve market equilibrium?

Why does it happen that at all opportunities of the buyer and the seller's requests, they nevertheless join at a certain price and quantitative point in order to conclude a deal? And in that case everyone is happy - somebody got the proceeds, and somebody satisfied his needs, and sometimes, if the budget plan allows, then there can be surpluses of the consumer, which is also a pleasant bonus, because the money is left !!

All this happens for the reason that our market is elastic, in other words, any demand is sensitive in relation to the offer, the quality of the product and its value. At the same time, we can say that purchasing power is much more elastic and adapts to changes in external factors much faster than the seller's ability.

Therefore, if apples one day rise in price, the demand for some time will fall slightly, but later it will recover, but if the tax policy on purchase of apples becomes different, then the manufacturer will have to spend much more time getting his trade.

Surplus of the consumer and the state

Sometimes it happens that the state intervenes in the pricing process (often in countries with a planned economy regime ) and sets a threshold for the value of the goods. On the graph (see below), the straight line P ₁ indicates the government's border, which is below the equilibrium limit. In this case, of course, the consumer's profit will be much higher than before, but there may be a shortage of goods, which is graphically depicted in the interval Q ₁ - Q ₂ .

Hence the conclusion suggests that any interference of a third force entails a decrease in the level of the well-being of the population, since a certain part of it will remain without goods. Therefore, the market process should be the result of interaction between the buyer and the seller in a healthy competitive environment, and nothing more.