If the most someone is willing to pay for ticket to see their favorite team is $100 and the market price of the ticket is $35, then this buyer will get consumer surplus of $65.
Consumer Surplus = Maximum Price Willing - Actual Price
Methods for Determining Consumer Surplus
Consumer surplus is a term used in economics to describe the difference between what consumers are willing to pay for a commodity or service and its market price, or the benefit (or surplus). The marginal utility theory of economics serves as the foundation for the consumer surplus formula. According to the hypothesis, spending patterns vary depending on an individual's preferences. A surplus is produced when people's willingness to pay for a particular commodity or service varies. Several different corporate finance occupations use this metric.
The equilibrium price is the point at which supply and demand coincide. Product surplus (PS) is the region above the supply level and below the equilibrium price, and consumer surplus is the region below the demand level and above the equilibrium price (CS).
Complete revenues minus total costs equals profit. In contrast, producer surplus is the difference between the proceeds from the sale of one good and its marginal, direct cost of production.
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