How to Calculate Consumer Surplus

  Рет қаралды 491,351

Free Econ Help

Free Econ Help

13 жыл бұрын

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: www.freeeconhelp.com/2011/09/...
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!
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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

Пікірлер: 127
@FreeEconHelp
@FreeEconHelp 6 жыл бұрын
Thanks for watching, I hope you found it helpful! As always, please feel free to leave any questions below and I will do my best to address them. I appreciate the "thank you!"s, LIKES, and subscribes. It motivates me to keep making new content. Good luck with exams and class!!!
@danaelona4081
@danaelona4081 5 жыл бұрын
How did you know what equilibrium quantity was five??
@aaroncade1136
@aaroncade1136 7 жыл бұрын
As an exhausted collage student whos studying at 4 am in the morning, Bless your heart...
@AsherSkylark
@AsherSkylark 7 жыл бұрын
ifeel you bro
@matthewlocklear14
@matthewlocklear14 6 жыл бұрын
fuk. same lol
@Elusive0101
@Elusive0101 6 жыл бұрын
2:44 am here right now
@AClown
@AClown 6 жыл бұрын
lol 3:40am for me right now, I really should have started earlier
@PJWOODS
@PJWOODS 5 жыл бұрын
FUck you aaron
@HannahRaizman
@HannahRaizman 3 жыл бұрын
You're still helping students 9 years later. Thank you!
@hunter7995
@hunter7995 Жыл бұрын
11*
@yemartini5443
@yemartini5443 8 ай бұрын
12*@@hunter7995
@XtremeKillah101
@XtremeKillah101 8 жыл бұрын
didn't know chris from family guy was so good at economics
@benwolf5264
@benwolf5264 6 жыл бұрын
im dead
@MastersinNexs
@MastersinNexs 3 жыл бұрын
Usually old KZbins videos don't help but I'm watching this in 2021 very helpful
@kharisgardner6988
@kharisgardner6988 4 жыл бұрын
thank you! I've been struggling with this so much and your video is the only one I've understood
@MissRuhi23
@MissRuhi23 5 жыл бұрын
Thank you for taking the time and posting! It was VERY helpful :)
@rodaynagebril9648
@rodaynagebril9648 8 жыл бұрын
you just made everything clear , thank you!
@jproknapp10
@jproknapp10 9 жыл бұрын
Thank you! You made it a lot easier!
@vanshkataria3850
@vanshkataria3850 4 жыл бұрын
I like how chill u are with your handwriting.. And that 'r' of yours 🔥
@AliKhan-cj3ee
@AliKhan-cj3ee 3 жыл бұрын
You're an absolute beauty for making this video. Thanks a lot
@annag.1330
@annag.1330 7 жыл бұрын
that helped me out a lot for my next exam. thousand thanks :)
@Salvation1984
@Salvation1984 4 жыл бұрын
Thanks! Easy and simple explanation.
@ulgk
@ulgk 11 жыл бұрын
Thanks bud, you help me out on a problem I am studying for a test.
@daenerysdivine1906
@daenerysdivine1906 4 жыл бұрын
Thank god for this video. I have a quiz soon over this.
@suzetteitaylor9628
@suzetteitaylor9628 11 жыл бұрын
Thank you. Much easier to comprehend now!
@korayramis
@korayramis 2 жыл бұрын
Amazing explanation, thanks!
@alisflores8840
@alisflores8840 3 жыл бұрын
Thank you for the good explanation.
@blissabreeze
@blissabreeze 11 жыл бұрын
Thank you so much for this!!
@desmondmashanga4937
@desmondmashanga4937 5 жыл бұрын
Thank you the lesson is so helpful. i have learnt a lot what i havent known
@FreeEconHelp
@FreeEconHelp 5 жыл бұрын
Awesome! Good luck in class.
@screedva4084
@screedva4084 2 жыл бұрын
very straight forward thx
@ncllttferguson4
@ncllttferguson4 11 жыл бұрын
thank u!!! ur videos r a God send!!!
@hicksandrea
@hicksandrea 2 жыл бұрын
Thanks for helping me understand!!!❤️❤️
@StefKe333
@StefKe333 5 жыл бұрын
Hi, Thanks for the vidéo! I have a question though: why do you consider that WTP is the point where the demand curve intersects the y-axis? How can you have a consumer surplus on a point where demand is zero?
@user-ip5il2ig6b
@user-ip5il2ig6b 4 жыл бұрын
Thank you this is very helpful
@ManuellaEm
@ManuellaEm 10 жыл бұрын
Quasimodo from your workbook has the utility function U (x, m) = 100x-(x^2)/2 +m where x is his consumption of earplugs and m is money left over to spend on other stuff . If he has $10,000 to spend on earplugs and other stuff , and if the price of earplugs rises from $50 to 65, then his net consumer's surplus: falls by 637.50. How did we find that it falls by 637.50? thank you
@Shortsdopaminechaser
@Shortsdopaminechaser 2 жыл бұрын
guessing you didn't finish the education
@jeniferonunekwu3882
@jeniferonunekwu3882 4 жыл бұрын
Thanks this really helped.
@Samer-Taha
@Samer-Taha 11 жыл бұрын
Thank you for this
@mykapoorman454
@mykapoorman454 3 жыл бұрын
Thank you so much!!
@nn-xm8lz
@nn-xm8lz 4 жыл бұрын
thanks much easier than what my no-swag professor tried to explain it
@heba.osaily2343
@heba.osaily2343 9 жыл бұрын
Thank you its great
@elinsony
@elinsony 5 жыл бұрын
Thank you, you rock.
@MsLovelypear
@MsLovelypear 12 жыл бұрын
you are a life saver.
@hauteswan2541
@hauteswan2541 5 жыл бұрын
Great until the end when your logo covered the equation. Really good though! Thanks.
@FreeEconHelp
@FreeEconHelp 5 жыл бұрын
Sorry about that, it's been updated. Good luck with class!
@emilyf.9315
@emilyf.9315 2 жыл бұрын
I have a crush on your voice. thanks for helping me pass my exam
@manueldizdarevic3228
@manueldizdarevic3228 8 жыл бұрын
how do i find the price height if its not given? same with base if its not given?
@edwardaboagye894
@edwardaboagye894 9 жыл бұрын
Very good
@Finley72
@Finley72 7 жыл бұрын
UR THE GOAT
@Em-ke2fe
@Em-ke2fe Жыл бұрын
THANK YOUUUU
@Ant-dx9uu
@Ant-dx9uu 4 жыл бұрын
life saver!
@FreeEconHelp
@FreeEconHelp 12 жыл бұрын
@nitrousflash59 Depends what "midpoint" means. With your problem the max demanded would be 16 (if P=0), and the min is 0, so the midpoint here would be 8 quantity (with a price of 4). This would mean revenue is Q*P or 8*4. Again, this depends on what your instructor means by "midpoint"
@j.palenzuela3786
@j.palenzuela3786 7 жыл бұрын
hey man nice movie
@77Switchfoot
@77Switchfoot 11 жыл бұрын
Thanks for the help! This guy sounds exactly like Blake from Workaholics
@katherinelima7312
@katherinelima7312 Жыл бұрын
why do professor go over all the word stuff but never show exampled as simple as this in class ! thanks so much I got my midterm in two days
@SimranKaur-yp1og
@SimranKaur-yp1og 4 ай бұрын
fantastic
@TheNoirTrap
@TheNoirTrap 3 жыл бұрын
Thank you
@nitrousflash59
@nitrousflash59 12 жыл бұрын
@FreeEconHelp Thanks, but the question I was given, it says assuming supply crosses demand at the midpoint, no set price was given.
@homiefilms
@homiefilms 13 жыл бұрын
helped a lot♦
@FreeEconHelp
@FreeEconHelp 12 жыл бұрын
@nitrousflash59 Total revenue is calculated by multiplying Price * Quantity. Or P*Q = revenue. So if price was 5, and quantity was 5, total revenue would be 25. Note that total revenue is not the same as producer surplus.
@thecoffeemaker7618
@thecoffeemaker7618 6 жыл бұрын
dude you really saved my ass
@RunescapePkKing12
@RunescapePkKing12 12 жыл бұрын
great thanks!
@isaacgutierrez6036
@isaacgutierrez6036 3 жыл бұрын
just saved my ass dude thanks
@salbil5511
@salbil5511 4 жыл бұрын
very herlpful
@silindilemnyandu954
@silindilemnyandu954 3 жыл бұрын
Too good
@jairtzinio
@jairtzinio 10 жыл бұрын
i find this to be confusing, with out doing the math i can already tell its 5 but when i do it like you do i get 300 which isnt the answer at all
@rodaynagebril9648
@rodaynagebril9648 8 жыл бұрын
c. How could the producer of commodity X extract the entire consumer surplus from this consumer?
@FreeEconHelp
@FreeEconHelp 8 жыл бұрын
+rodayna gebril Price descrimination
@davidelive04
@davidelive04 9 жыл бұрын
So if we increase demand we increase con surp?
@acdc792
@acdc792 12 жыл бұрын
thanks!
@mortaltirant
@mortaltirant 12 жыл бұрын
Thank you very much....My stupid book didn't say this and my teachers beyond worthless since its an online class.
@jfan5453
@jfan5453 6 жыл бұрын
i cant find how to solve consumer surplus given quantity demanded and market price imma get analed tmr and fail this course again
@jaredmiller5883
@jaredmiller5883 3 жыл бұрын
Bro they got me out here doing this shit in highschool. I’m ab to not graduate bc of how hard this class is
@izzy926
@izzy926 3 жыл бұрын
@@jaredmiller5883 lmfao same
@nurjakhonradjabov2180
@nurjakhonradjabov2180 7 жыл бұрын
What if WTP is $400, Equilibrium P was $200 and tax $100. For that Quantity with levied tax equal is 50. So according to formula CS is 2500?
@marryson123
@marryson123 12 жыл бұрын
can I use this calculation for "TOTAL" consumer surplus?
@MuhammadTahir-ph3gs
@MuhammadTahir-ph3gs 6 жыл бұрын
if government fixed the price of any goods then there is producer surplus or consumer surplus. give reson plz
@juezy1234
@juezy1234 11 жыл бұрын
how about a type of question that doesnt give you the price ? for example, Water has the following demand function Qd = 200-P and a supply curve given by the following Qs=100. What is the value of consumer surplus at the market equilibrium?
@FreeEconHelp
@FreeEconHelp 12 жыл бұрын
@marryson123 I don't think there is a difference between "consumer surplus" and "total consumer surplus". You may be referring to consumer surplus for everyone (which is the area of the triangle) vs. an individual's consumer surplus which is the difference between one point on the demand curve and the price. However, there is a big difference between "total surplus" and "consumer surplus".
@nitrousflash59
@nitrousflash59 12 жыл бұрын
I have a question, given Q = 16-2P, at the equilibrium, how would you find the total revenue? Thanks if you can help, if not, thanks anyways.
@badguy4839
@badguy4839 7 жыл бұрын
How to i apply Consumer Surplus on my life ? What benefit from it ?
@travisbplank
@travisbplank 9 жыл бұрын
This is probably a stupid question, but how do I find the height of the CS triangle?
@FreeEconHelp
@FreeEconHelp 9 жыл бұрын
Travis Plank Difference between the demand intercept and market price.
@lacrossetimes6986
@lacrossetimes6986 9 жыл бұрын
You literally have the exact same hand writing as me
@kkkkayla8283
@kkkkayla8283 2 жыл бұрын
I found that using different method would result in a different consumer surplus. Using the data give in the video, the consumer surplus would be 5x(10-5)/2=$12.5 but if I add it in this way: (9-5)+(8-5)+(7-5)+(6-5)+(5-5)=10 same answer but diffrent way: (9+8+7+6+5)-(5x5)=$10 it confuses me a lot because my textbook uses the method which result in a diffrent answer with the area of triangle. Thx a lot if anyone read this comment and help solve my problem.
@pupasarus
@pupasarus 12 жыл бұрын
my problem is D(q)=2000/(2q+5)^2 and q=5. How do you do that?
@destinypfeiffer5631
@destinypfeiffer5631 Жыл бұрын
not understand how you determine the upper limit from a demand function
@SimranKaur-yp1og
@SimranKaur-yp1og 4 ай бұрын
super
@FreeEconHelp
@FreeEconHelp 12 жыл бұрын
@HomieFilms Glad it helped
@sunnyjain8172
@sunnyjain8172 4 жыл бұрын
Thnx
@zainzafar08
@zainzafar08 9 жыл бұрын
I really need help with this question Q = 20 - .5P If the price is £18. How do I work the consumer surplus. I kept getting £11 as I substituted £18 into the equation. However the answer written is £121. How do I get £121?
@popnfreshz
@popnfreshz 9 жыл бұрын
zainzafar08 use integration
@nickgoffredo600
@nickgoffredo600 5 жыл бұрын
How do I find the consumer surplus WITHOUT knowing the maximum willingness to pay? Like how do I find the height of that triangle...
@FreeEconHelp
@FreeEconHelp 5 жыл бұрын
Unfortunately you have to have max WTP. Maybe you were given a demand function like Qd=500-2P. In this case solve for P and the intercept gives you max WTP (eg. P = 250 -1/2Qd) the max WTP is 250.
@nickgoffredo600
@nickgoffredo600 5 жыл бұрын
@@FreeEconHelp unfortunately, my prof says there is another way to do it without finding max WTP... no demand function was given... just a graph with an original equilibrium point (and its respective values) as well as a new equilibrium point (with its respective values). is there a standard demand equation i could use to plug in the numbers? If so, what numbers do I plug in where?
@edgarmania007
@edgarmania007 10 жыл бұрын
What happens if the demand curve is non linear?
@desglaciators
@desglaciators 9 жыл бұрын
edgar hernandez Integrals!
@haretztj4682
@haretztj4682 3 жыл бұрын
has anyone ever told you that your voice sound like the Broadway star Andrew Rannels?
@moviestar79
@moviestar79 9 жыл бұрын
how do you get the 10 on the graph if its not given??
@FreeEconHelp
@FreeEconHelp 9 жыл бұрын
Mary Nicola Solve P (or Q) for when Q (or P) is equal to zero, which represents the intercept along either axis.
@moviestar79
@moviestar79 9 жыл бұрын
Thank you!
@david6028
@david6028 3 жыл бұрын
man said movie
@abdullahal9174
@abdullahal9174 Жыл бұрын
i love u
@TheMrsHurdle
@TheMrsHurdle 9 жыл бұрын
OMG ITS HEIGHT, NOT HEIGH"TH" otherwise, thank you, appreciate the help.
@FreeEconHelp
@FreeEconHelp 8 жыл бұрын
+Hannah Miller You are right. Again, I have made it apparent that I study Econ and not English...
@TheMrsHurdle
@TheMrsHurdle 8 жыл бұрын
You're trying. I respect that.
@koby68
@koby68 2 жыл бұрын
i still don’t get it! LMAOOOOOO
@jrpone
@jrpone 5 жыл бұрын
God I hate economic esp learning it online with shitty Pearson. Sorry just wanted to rant.
@dkolatschko
@dkolatschko 10 жыл бұрын
It's pronounced HEIGHT, not "HEIGTH"!!! Stop adding a "-th" sound to the end of it.
@dannyykingg
@dannyykingg 10 жыл бұрын
you are an idiot!! Is this an english class?? or are you so stupid that you can't that they mean the same thing.
@JeffArteagaSpeech
@JeffArteagaSpeech 10 жыл бұрын
Content, you moron... CONTENT...
@dannyykingg
@dannyykingg 10 жыл бұрын
Took you long enough to come up with this. Don't try to justify your stupidity! How does that matter in this lecture?
@JeffArteagaSpeech
@JeffArteagaSpeech 10 жыл бұрын
I was referring to the guy above, not you. But thank you for the insult
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