amount in the dark shaded area. The total value she places on these six
litres is the entire shaded area. Her consumer surplus is the light shaded
area.
The sum of the values that she places on each litre of milk gives us the
total value that she places on all 10 litres. In this case, Moira values the 10
litres of milk per week at $17.10. This is the amount she would be willing
to pay if she were offered the milk one litre at a time and charged the
maximum she was willing to pay for each litre.
However, Moira does not have to pay a different price for each litre of
milk she consumes each week; she can buy all she wants at the prevailing
market price. Suppose the price is $1.00 per litre. She will buy six litres
per week because she values the sixth litre just at the market price but all
earlier litres at higher amounts. She does not buy a seventh litre because
she values it at less than the market price.
Because Moira values the first litre at $6.00 but gets it for $1.00, she
makes a “profit” of $5.00 on that litre. Between her $3.00 valuation of the
second litre and what she has to pay for it, she makes a “profit” of $2.00, a
$1.00 profit on the third litre, and so on. This “profit,” which is shown in
the third column of the table, is Moira’s consumer surplus on each litre of
milk.
We can calculate Moira’s total consumer surplus of $8.80 per week by
summing her surplus on each litre that she actually purchases; we can
calculate the same total by first summing what she would be willing to