Andrew Miller wrote:
I'm not familiar with 'consumer's surplus'. What does it mean?
Peter Spiro replied:
Consumers' surplus exists in markets where all consumers pay the same price for the same good or service. Consumers are all different people, and the good or service X is more important (and hence more valuable) to some people than others. However, in a competitive market, the price is actually determined by what it's worth to the marginal consumer who values it the least. All the other consumers are getting more than their money's worth, so to speak, and this is their surplus.
In non-competitive markets, such as airlines, the company charges more for the same flight to different types of customers, attempting to grab back this surplus. There's an article on the concept at Wikipedia[...]
I like your explanation better: especially with the example, it is easier to understand. Now I wonder:
How can Wikipedia get contributors to make articles less technical and easier for non-experts to understand?
* i.e. add examples? * Or have an initial "easy explanation" section then a later advanced explanation section? * Or what?
Cheers,