Consumer Surplus Calculator

Product and service pricing varies all the time. If you are evaluating your next price change, use this consumer surplus calculator to help you understand the difference in price.

Required Information

Consumer Surplus:

What it is

What is Consumer Surplus?

Create Date: September 13, 2024

Last Modified Date: December 2, 2024

In business, consumer surplus is the difference between the price customers are willing to pay and the price they are currently paying for a product or a service.

How do you Calculate Consumer Surplus?

Calculating consumer surplus involves two variables:

  1. Current price

  2. Willing to pay price
Once you have these values you can then use them in the following formula to calculate consumer surplus:
An image showing the formula for calculating consumer surplus.
Where:
  • CS = Consumer surplus

  • WTP = Willing to pay price

  • P = Actual price

Understanding Your Results

Your answer will be a dollar amount which outlines the difference in the amount of something and the amount some people are willing to pay for it. This number can be both negative or positive, depending on the situation. If your result is negative, it indicates that your consumers are likely not enticed to buy the product at the price. Alternatively, if the surplus is positive, it means they are likely to pay your price, and may even be very satisfied with their decision to purchase it depending on just how much surplus there is.

How to Use the Consumer Surplus Tool

Our consumer surplus tool is designed to be easy to use. To use it, you must do the following:

  1. Enter the current price of the item.

  2. Enter the price consumers are willing to pay for that item.

  3. Hit calculate and get the answer instantly!

Example Calculation

Let's say we run a go-kart business and we want to assess how satisfied customers are with our pricing. We will use this tool to calculate the consumer surplus to help us gauge that. We currently sell a ride on the go-karts for $10 and know that in the past customers were paying $15.

We can now use this tool to help us calculate. We enter 10 into the current price field and 15 in the willing to pay field. When we hit calculate we get a consumer surplus of $5. This is a good positive value and likely indicates people are satisfied with their purchase as they are still coming back but spending less per ride than what they are normally happy to pay.

Consumer Surplus - Frequently Asked Questions

Theoretically, a low consumer surplus is not a good thing. Consumers love to get the most out of their money. If they spend $20 they want to feel like they are getting $50 worth of value. When consumer surplus is low, it means consumers are closer to feeling that the price paid is not worth the product or service.

There are many factors that can cause consumer surplus to fall, such as product or service obsolescence, rising competition, or reduced perceived value of the product. All these can lead to consumers valuing your product less, thus decreasing consumer surplus.

To maximize consumer surplus, ensure your customers are receiving a quality product that delivers what is advertised efficiently. Offering reasonable pricing and excellent customer service can also help maintain or increase consumer surplus.

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