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Market Efficiency 299

surplus enjoyed by purchasers? The answer is straightforward: Consumer sur-

plus is measured by the triangle inscribed under the demand curve and above

the price line. After all, the demand curve indicates what consumers are will-

ingto pay, and the price line indicates what they actually pay, so the difference

(added up over all units consumed) is their total surplus. Recall that the area

of a triangle is given by one-half of its height times its base. Thus, the consumer

surplus from 8 million hours demanded at a $4 price comes to (.5)(12 4)(8) 

$32 million.^11

FIGURE 7.6

Regional Demand for

Day Care

At a price of $4, the

total demand for day

care is 8 million hours

per week. Parents

receive a total

consumer surplus of

$32 million.

12

8

10

P = 4

24681012

Q

Hours of Day Care (Millions)

Hourly Price

2

6

Consumer

surplus

$32 million

14

$14

Regional demand curve

0

(^11) An equivalent way to find consumer surplus is to reason as follows. The first unit consumed earns
a surplus of 12  4 8. The last (i.e., 8-millionth) unit consumed earns a surplus of 4  4 0.
Since demand is linear, the average surplus per unit is (8 0)/2 $4. We multiply this by 8 mil-
lion units to arrive at a total surplus of $32 million.
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