Criticism of Consumer’s Surplus
The concept of consumer’s surplus has been subjected to scathing criticism by economists like ~an~an, Nicholson, Robinson and Davenport. Its Scientific character has been attacked on the ground that it is based on assumptions which are unwarranted. As pointed out above. there are several difficulties its exact measurement so that it has little practical utility, II~measurement assumes that utilities arc capable of exact measurement and can be translated in terms of money. It further assumes, that different units of the commodity have different utilities. Moreover. the utility of each commodity is regarded as something independent which it is not. It is also assumed that the marginal utility of money remains constant. While we go on spending money. (he utility of each unit of the money left with us increases, while the marginal utility of the commodity fatalistically makes the calculation of consumer’s surplus still more difficult. The validity of the concept has been questioned on the ground that the assumptions on which it is based do not hold good in practice. Marshall has, however, defended it by pointing out that a consumer spends only a fraction of the amount of money he has on a particular commodity. Hence, for practical purposes, the marginal utility of money may be assumed to be constant.
Hicks has. however, given a representation of consumer’s surplus with the help of indifference curves which makes the concept independent of this assumption, i.e.. constant marginal utility of money. 4 In the case of necessaries and conventional necessaries, it seems to have no application, for in such cases the consumer’ will be willing to pay any amount rather than go without. The utility i infinite criticism is that it is incapable of precise numerical measurement. This may at once be conceded. But it cannot be denied that something like this does exist 111 real life rather than go without a thing, we arc prepared to pay more than what we actually pay. In this way, we do enjoy a surplus of satisfaction, though we cannot say exactly how much. It certainly tells us that a system of uniform market price does yield a surplus of satisfaction to some consumers who would have been able and willing to pay more if the alternative was to go outwit. In Carl life, the tallness;colitis are of a type which yield a surplus satisfactorily to the consumers. Thus.the concept of consumer’s surplus has great practical utility and serves as a Introit modern economic welfare analysis.