1. What is Consumer Surplus?

Consumer surplus is the difference between what consumers are willing to pay for a good or service and what they actually pay. It represents the economic benefit to consumers from participating in the market.

2. How Does the Calculator Work?

The calculator uses the integral of the demand function:

Where:

• \( D(Q) \) — Demand function (price as function of quantity)
• \( P \) — Equilibrium price
• \( Q_{eq} \) — Equilibrium quantity

Explanation: For a linear demand function \( D(Q) = a - bQ \), the consumer surplus simplifies to \( CS = \frac{(a - P) \times Q_{eq}}{2} \).

3. Importance of Consumer Surplus

Details: Consumer surplus is a key concept in welfare economics, used to measure consumer welfare, analyze market efficiency, and evaluate the impact of policies like taxes or price controls.

4. Using the Calculator

Tips:

• Enter the demand function in terms of Q (e.g., "100 - 2*Q")
• Enter the equilibrium price and quantity
• The calculator currently supports linear demand functions

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between consumer and producer surplus?
A: Consumer surplus is the benefit to buyers, while producer surplus is the benefit to sellers (area above supply curve but below price).

Q2: Can consumer surplus be negative?
A: Normally no, since consumers wouldn't buy if price exceeded their willingness to pay. Negative values suggest incorrect inputs.

Q3: How does elasticity affect consumer surplus?
A: More inelastic demand typically leads to greater consumer surplus as consumers are willing to pay much more than the market price.

Q4: What are limitations of this calculation?
A: Assumes accurate demand function, constant preferences, and doesn't account for income effects or substitution.

Q5: How is this used in policy analysis?
A: Used to evaluate welfare effects of taxes, subsidies, price controls, and other market interventions.