6.3 Consumer Surplus

We have now studied two alternative methods to explain why demand
curves have a negative slope, the first using marginal utility theory and
the second using substitution and income effects. In this section we use
marginal utility theory to introduce the important concept of consumer
surplus. We will revisit the distinction between marginal and total utility
and see how confusion between these two concepts led to a famous
paradox in the history of economic theory.

The Concept

Consumer surplus is the difference between the total value that
consumers place on all the units consumed of some product and the
payment they actually make to purchase that amount of the product. It is
like a “profit” for consumers because they can purchase a product for less
than the maximum amount they are prepared to pay.

Consumer surplus is a direct consequence of negatively sloped demand
curves. This is easiest to understand if you think of an individual’s
demand curve as showing his or her willingness to pay for successive
units of the product. (You may recall our discussion of this point in
Chapter 5 .) To illustrate the concept, suppose we have interviewed
Moira and displayed the information from the interview in the table in

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