Thursday, November 11, 2010

Consumer Surplus

I don’t know how much time you spend when discussing consumer and producer surplus; or how difficult your students find the concept. My experience is mixed.  Some classes seem to get the idea quickly and can transfer the concept to other topics easily. Others seem to struggle. But here is a short post from Econlog that not only explains consumer surplus quickly and efficiently, it offers a quick and easy way to expand the explanation into a discussion.  What do you think?


Faizan.Q (fizzy) said...

In my economics class, we didn’t put much time into learning about either consumer or producer surplus. Yet, I remember these terms because both share the willingness to give up more for something but in actuality they receive more or pay less than intended. On the blog, there are some great examples in the comments such as the iPod one in which the person didn’t buy a new iPod touch and gained a consumer surplus from using a previous 5 year old iPod model. One question I have is, how does this become related with other topics? I’m sure there is more to it than the supply and demand graph approach to it or Marxian economy (which we haven’t fully studied yet).

Tim Schilling said...

I've found that consumer/producer surplus become very helpful when discussing the impact of taxes, etc. and the idea of dead-weight loss. When you use a graphic representation it becomes easy to see the changes in surpus, the government revenue, etc. It is also helpful when explaining how to find social surplus when dealing with externalities.