Consumer surplus
MEANING Sometimes a consumer feels that he is deriving more satisfaction from the consumption of a good than the amount of sacrifice he makes in money terms while getting it. This feeling in consumer's mind has been given the name of 'CONSUMER SURPLUS'. According to Penson," The difference between what we would pay and what we have to pay is called the Consumer's Surplus. ASSUMPTIONS Marshall's concept of Consumer Surplus is based on certain assumptions. They are:- 1) Utility can be measured cardinally. 2) The quantity of money with a consumer does not affect the MU of money with him. 3) There is no change in income,fashion and taste of the consumer. 4) There are no substitutes of the commodity from which Consumer Surplus is being derived. 5) The concept comes true only if the law of Diminishing MU holds good. EXPLANATION To illustrate, let us suppose that a consumer is willing to buy 1 orange if it's price were Rs. 1, 2 oranges if the p...