Meaning

We owe to Marshall the introduction of the concept of consumer’s surplus. His idea was to give a definite expression to something with which we, as consumers, are all familiar.

Even in our ordinary purchases there is some consumer’s surplus since we may be prepared to pay more than we actually pay for a commodity. But consumer’s surplus is to be found especially in the purchase of commodities which are highly useful, but which are very cheap, e.g., post card, newspaper, match box, soap, salt, etc. For such commodities, we are prepared to pay much more than we actually pay  if the alternative is to go without them. The extra satisfaction that we derive is called consumer’s surplus. In the words of Marshall, “The excess of the price which he (i.e., consumer) would he willing to pay rather than go without the thing over that which he actual docs pay is the economic measure or this surplus satisfaction .It may he called Consumer’s Surplus. To use Hicks words. It (consumer’s surplus) is the deterrence between the marginal valuation of a unit and the price which is actually paid  to it.

In short, consumer’s surplus is what we are prepared to pay minus what we actually pay. As will be clear from the following section, the consumer’s surplus is measured by the difference between total utility and the amount spent.