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measuring consumer surplusthe demand curve is a graphic representation used to calculate consumer surplus it shows the relationship between the price of a product and the quantity of the product demanded at that price with the price drawn on the y axis of the graph and the quantity demanded drawn on the x axis because of the law of diminishing marginal utility the demand curve is downward sloping consumer surplus is measured as the area below the downward sloping demand curve or the amount a consumer is willing to spend for given quantities of a good and above the actual market price of the good depicted with a horizontal line drawn between the y axis and demand curve consumer surplus can be calculated on either an individual or aggregate basis depending on if the demand curve is individual or aggregated consumer surplus always increases as the price of a good falls and decreases as the price of a good rises for example suppose consumers are willing to pay 50 for the first unit of product a and 20 for the 50th unit if 50 of the units are sold at 20 each then 49 of the units were sold at a consumer surplus assuming the demand curve is constant consumer surplus is zero when the demand for a good is perfectly elastic but demand is perfectly inelastic when consumer surplus is infinite economic welfare is also called community surplus or the total of consumer and producer surplus example of consumer surplusconsumer surplus is the benefit or good feeling of getting a good deal for example let s say that you bought an airline ticket for a flight to disney world during school vacation week for 100 but you were expecting and willing to pay 300 for one ticket the 200 represents your consumer surplus however businesses know how to turn consumer surplus into producer surplus in our example let s say the airline realizes your surplus and as the calendar draws near to school vacation week raises its ticket prices to 600 each the airline knows there will be a spike in demand for travel to disney world during school vacation week and that consumers will be willing to pay higher prices so by raising the ticket prices the airlines are taking potential consumer surplus and turning it into producer surplus or additional profits 