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  Importance of Consumers Surplus

Importance of Consumer’s Surplus:

Consumer’s Surplus is helpful to the Finance Minister in formulating taxation policies. This is also useful in fixing a higher price by a monopolist in the market; depend on the extent of consumer’s excess benefit by consumers.

Consumer’s Surplus allows comparison of the standard of living of people of various regions or countries. This comparison aids to differentiate consumption levels among the people, who are living in rich and poor countries. For illustration, a middleclass person in New York benefits from more consumers’ surplus than a similar person in poor country. Alfred Marshall has defined that a middle class person in a modern city enjoys much consumer’s surplus than a king of Medieval Ages.

 

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