Consumers Surplus
The concept of consumer surplus was introduced by A.J. Dupit in 1844. Later on, Alfred Marshall developed it in his book, "Principle of Economics" published in 1890.The concept of consumer surplus is related to our daily life expenses. The excess of benefits from the consumption of a commodity over the sacrifice made in terms of price paid for the commodity is called consumer's surplus. Assumptions of the law of consumers surplus Expected price should be more than actual price Marginal utility must be greater equal to the price of commodity Utility can be measured in cardinal number Consumer is rational person Constant marginal utility of money
Summary
The concept of consumer surplus was introduced by A.J. Dupit in 1844. Later on, Alfred Marshall developed it in his book, "Principle of Economics" published in 1890.The concept of consumer surplus is related to our daily life expenses. The excess of benefits from the consumption of a commodity over the sacrifice made in terms of price paid for the commodity is called consumer's surplus. Assumptions of the law of consumers surplus Expected price should be more than actual price Marginal utility must be greater equal to the price of commodity Utility can be measured in cardinal number Consumer is rational person Constant marginal utility of money
Things to Remember
- The concept of consumer surplus was introduced by A.J. Dupit in 1844.
- Alfred Marshall developed it in his book, "Principle of Economics" published in 1890.
Criticism of consumer surplus
- Marginal utility of money is not constant
- Actual price may be greater than expected price
- Utility is not measurable
- It is not applicable to measure necessary goods
- It neglects the complementary and substitutable goods
Importance of Consumer Surplus
- To determine price of goods and service
- To determine the tax rate
- Guidelines for consumers and producer
- Cost-benefit analysis/Project selection
- International trade
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Subjective Questions
Q1:
Define Antisocial personality disorder.
Type: Very_short Difficulty: Easy
<p>Antisocial personality disorder is characterized by a pattern of disregard for and violation of the rights of others. The diagnosis of antisocial personality disorder is not given to individuals under the age of 18 and is only given if there is a history of some symptoms of conduct disorder before age 15.</p>
Q2:
What are the Sign and symptoms of antisocial personality disorder ?
Type: Short Difficulty: Easy
<li>being angry often</li>
<li>being arrogant</li>
<li>manipulating others</li>
<li>acting witty and charming to get what they want</li>
<li>lying frequently</li>
<li>stealing</li>
<li>acting aggressively and fighting often</li>
<li>breaking the law</li>
<li>not caring about personal safety or the safety of others</li>
<li>not showing guilt or remorse for actions</li>
</ul>
Q3:
Write the treatmnent of antisocial personality disorder ?
Type: Short Difficulty: Easy
<li>Psychotherapy</li>
</ul>
<p>Cognitive behavioral therapy can help reveal negative thoughts and behaviors. It can also teach ways of replacing them with positive ones.</p>
<p>Psychodynamic psychotherapy can increase awareness of negative, unconscious thoughts and behaviors. This can help the person change them.</p>
<p> </p>
<ul>
<li>Medications</li>
</ul>
<p>No medications are specifically approved for the treatment of ASPD. Your doctor may prescribe:</p>
<ul>
<li>antidepressants</li>
<li>mood stabilizers</li>
<li>antianxiety medications</li>
<li>antipsychotic medications</li>
</ul>
Q4:
What are the Nursing management of antisocial personality disorder ?
Type: Long Difficulty: Easy
<li>Work with the client to increase coping skills and identify need for improvement coping.</li>
<li>Respond to the client’s specific symptoms and needs.</li>
<li>Keep communication clear and consistent.</li>
<li>Client may require physical restraints, seclusion/observation room, one to one supervision.</li>
<li>Keep the client involved in treatment planning.</li>
<li>Avoid becoming victim to the client’s involvement in appropriate self-help groups.</li>
<li>Require the client take responsibility for his/her own behavior and the consequences for actions.</li>
<li>Discuss with the client and family the possible environment and situational causes, contributing factors, and triggers.</li>
</ul>
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Consumers Surplus
CONSUMER SURPLUS
The concept of consumer surplus was introduced by A.J. Dupit in 1844. Later on, Alfred Marshall developed it in his book, "Principle of Economics" published in 1890.
The concept of consumer surplus is related to our daily life expenses. The excess of benefits from the consumption of a commodity over the sacrifice made in terms of price paid for the commodity is called consumer's surplus.
According to Alfred Marshall, ”Excess of the price which a consumer would be willing to pay rather go without a thing over that which he actually does pay is the economic measure of this surplus satisfaction. It may be called consumer surplus."
In other words of A.Koutsoyannis, ”Consumers Surplus is equal to the difference between the amount of money that consumer actually pays to buy a certain quality rather than go without it".
In short,
Consumers Surplus(CS) = WP - AP
Where,
WP = Willing to pay price
AP = Actual paid price
It is also expressed as:
CS =TU - TS
Where,
TU =Total utility or total benefit derived
TS =Total amount spent
ASSUMPTIONS OFTHE LAW OF CONSUMERS SURPLUS
- Expected price should be more than actual price
- Marginal utility must be greater equal to the price of commodity
- Utility can be measured in cardinal number
- Consumer is rational person
- Constant marginal utility of money
The concept of consumer surplus for an individual consumer is represented below:
| Unit of goods | Actual price | Price willing to pay | Consumers Surplus |
| 1 | 60 | 120 | 60 |
| 2 | 60 | 100 | 40 |
| 3 | 60 | 80 | 20 |
| 4 | 60 | 70 | 10 |
| 5 | 60 | 60 | 0 |
| AP=300 | WP=430 | C.S=130 |
In the above table, a consumer tends to assume amount which they are Willing to Pay (WP) but is always greater than Actual Pay (AP). When the consumer buys his 1st unit, then they are willing to pay 120 and the actual pay is 60 and the consumer surplus is 60. Again, when the consumer consumes 2nd unit, they are willing to pay 100 and the market price is always fixed. So, actual pay/price is 60 and consumer surplus is 40. This is used up to the 5th unit where consumers surplus is 0.
Consumers Surplus = WP - AP
= 430 - 300
= 130
Such data can be explained with the help of graphical representation.
In the above figure, X-axis measures the units of a commodity and Y-axis measures the MU or price willing to pay. The shaded part in the graph represents the consumer surplus that remains after deducting total cost from total utility.
CRITICISMS OF CONSUMER'S SURPLUS
- Marginal utility of money is not constant
This law assumes that the marginal utility of money remains constant throughout the process of exchange but the marginal utility of money does not remain constant. When the consumer spends his income on the purchase of the commodity ,the amount of money left him is reduced and its marginal utility to him increases.
- Actual price may be greater than expected price
The theory of consumer surplus that expected price is greater than the actual price. However, in real life, the actual prices are greater than expected price in the market.
- Utility is not measurable
The law of consumer surplus is based on the assumption that utility can be measured quantitatively in the terms of money but the utility is subjective phenomenon, it cannot be measured quantitatively.
- It is not applicable to measure necessary goods
It is not applicable to necessaries and luxurious goods. A consumer is simply willing to acquire goods. The consumer does not show any interest to get a surplus.
- It neglects the complementary and substitutable goods
The utility of any commodity depends on other commodity but this theory does not explain the role of complementary goods and substitutable goods.
IMPORTANCE OF CONSUMER'S SURPLUS
- To determine price of goods and service:
This law is very useful to determine the price of goods and services. If the consumer surplus is very high then the producer can determine high price of goods and services and vice versa.
- To determine the tax rate:
The law of consumer surplus is useful to the government to determine the tax rate. The government can determine the high rate of tax which goods and service have more consumer surplus and vice-versa.
- Guidelines for consumers and producer:
It can help the consumer to maximize the surplus and to maximize the profit by increasing the price of those goods which have more consumer supply.
- Cost-benefit analysis/Project selection:
If the expected cost incurred is less and benefit is more, the project may be selected,on the other hand, if the consumer feels that they are not getting any surplus the project may not be selected.
- International trade:
The law of consumer surplus is significant to estimate the given from the international trade. The government can produce and trade those type of goods and services in the international market which has more consumers surplus.
Bibliography
Jha, P.K., et al. Economics II. Kalimati, Kathmandu: Dreamland Publication, 2011.
Karna, Dr.Surendra Labh, Bhawani Prasad Khanal and Neelam Prasad Chaulagain. Economics. Kathmandu: Jupiter Publisher and Distributors Pvt. Ltd, 2070.
Khanal, Dr. Rajesh Keshar, et al. Economics II. Kathmandu: Januka Publication Pvt. Ltd., 2013.
Lesson
Theory of Consumer Behaviour
Subject
Economics
Grade
Grade 12
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