Answer :
Final answer:
Consumer surplus is the monetary gain to consumers resulting from being able to purchase a product below the maximum price they are willing to pay, calculated as the value to buyers minus the amount they actually pay.
Explanation:
Consumer surpluses equal the value to buyers minus the amount paid by buyers. In other words, it is the monetary gain obtained by consumers because they can purchase a product for a price that is less than the highest price they are willing to pay. An example of this would be a situation where a customer is willing to pay $50 for a pair of running shoes but finds them available for $35, thus experiencing a consumer surplus of $15. This concept is critical to understanding market efficiency and the benefits of exchange in an economy.
Contrastingly, producer surplus is the difference between the market price and the lowest price a seller is willing to accept, while social surplus is the sum of both consumer and producer surplus. In an efficient market, the total surplus (consumer plus producer surplus) is maximized at the equilibrium price and quantity, with any deviation resulting in a deadweight loss.
