Question

2. Does the concept of consumer surplus describe the benefits you get from what you buy? Think of a recent purchase: how would you compare the marginal utility of the good you bought with the utility value of the money you paid for it? Are there aspects of this purchase that don’t fit comfortably with the consumer surplus model?

Answer 1

The concept of consumer surplus describes the benefits you get from what you buy. When you pay less than what you are willing to pay for a good or service, there is a consumer surplus. The difference between what you are willing to pay and what you actually pay is the consumer surplus.

For example, i recently booked flight tickets to another city. There was a discount on booking round trip tickets with the same airline. So i got the tickets for much less than i was willing to pay. However, there is an aspect of this purchase that does not fit comfortably with the consumer surplus. I booked the round trip tickets even though it was my least preferred airline.