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Figure 3.1 Defining Consumer Surplus
Consumer surplus is the difference between the amount consumers are willing to pay and the amount they actually have to pay. The market demand curve shows how many pounds of apples consumers are willing to buy at a given price. The consumer at point A is willing to pay $5 for 1 pound of apples; at a market price of $3.50, this person has a consumer surplus of $1.50. Similarly, at the market price of $3.50, consumers at points B, C, and D have consumer surpluses of $1, $0.50, and $0, respectively. The consumer at point E does not purchase any apples. The total consumer surplus is the area under the demand curve and above the price, represented by the area of the shaded triangle CS, with the base of the triangle the total quantity sold and the height the difference between the market price and the demand choke price.