consumer surplus problem solving

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AP®︎/College Microeconomics

Course: ap®︎/college microeconomics   >   unit 2.

• Market equilibrium
• Demand curve as marginal benefit curve

Consumer surplus introduction

• Total consumer surplus as area
• Producer surplus
• Equilibrium, allocative efficiency and total surplus
• Consumer and Producer Surplus and Allocative Efficiency

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Video transcript

Module 4: Applications of Supply and Demand

Consumer & producer surplus, learning objectives.

• Explain, calculate, and illustrate consumer surplus
• Explain, calculate, and illustrate producer surplus
• Explain, calculate, and illustrate social surplus

Demand, Supply and Efficiency

The familiar demand and supply diagram holds within it the concept of allocative efficiency. One typical way that economists define efficiency is when it is impossible to improve the situation of one party without imposing a cost on another. Conversely, if a situation is inefficient, it becomes possible to benefit at least one party without imposing costs on others.

Efficiency in the demand and supply model has the same basic meaning: the economy is getting as much benefit as possible from its scarce resources and all the possible gains from trade have been achieved. In other words, the optimal amount of each good and service is being produced and consumed.

Consumer Surplus, Producer Surplus, Social Surplus

Consider a market for tablet computers, as shown in Figure 1. We usually think of demand curves as showing what quantity of some product consumers will buy at any price, but a demand curve can also be read the other way. If we choose a quantity of output, the demand curve shows the maximum price consumers would be willing to pay for that quantity. According to the demand curve in Figure 1, if producers wanted to sell a quantity of 20 million tablets, some customers are willing to pay $90 each (see point J.) In other words, a tablet is worth $90 to those customers.

Figure 1. Consumer and Producer Surplus. The somewhat triangular area labeled by F in the graph shows the area of consumer surplus, which shows that the equilibrium price in the market was less than what many of the consumers were willing to pay. The somewhat triangular area labeled by G shows the area of producer surplus, which shows that the equilibrium price received in the market was more than what many of the producers were willing to accept for their products.

However, that doesn’t mean that those customers will end up paying $90. Figure 1 shows that the equilibrium price is $80 and the equilibrium quantity is 28 million tablets. At that price, each customer who would have been willing to pay $90 for a tablet is getting a good deal. We all know what a good deal is—it’s when you get something for less than you think it’s worth. We don’t have to stop there. If suppliers chose to produce only 14 tables (as shown in point K), we can look at Figure 1 and up to the demand curve to see that some customers would have been willing to pay about $115 for a tablet at this quantity produced. What that means is that this subset of customers got an even better deal at the equilibrium price.

The demand curve shows what consumers are willing to pay for any given quantity of tablets. In other words, the height of the demand curve at any quantity shows what some consumers think those tablets are worth. We can formalize this idea of how good a deal consumers get on a transaction using the concept of consumer surplus.

Since a demand curve traces consumers’ willingness to pay for different quantities, we can define the gain to consumers as the difference between what they would have been willing to pay and the price that they actually paid. At point J, consumers were willing to pay $90, but they were able to purchase tablets at the equilibrium price of $80, so they gained $10 of extra value on each tablet. This is exactly analogous to the “profit” Bill earned from buying apples that we described in the previous page of reading. If we add up the gains at every quantity, we can measure the consumer surplus as the area under the demand curve up to the equilibrium quantity and above the equilibrium price. In Figure 1, the consumer surplus is the area labeled F.

The supply curve shows the quantity that firms are willing to supply at each price. For example, point K in Figure 1 illustrates that firms would have been willing to supply a quantity of 14 million tablets at a price of $45 each. Those producers were instead able to charge the equilibrium price of $80, clearly receiving an extra benefit beyond what they required to supply the product. The amount that a seller is paid for a good minus the seller’s actual cost is called producer surplus . In Figure 1, producer surplus is the area labeled G—that is, the area between the market price and the segment of the supply curve below the equilibrium.

To summarize, producers created and sold 28 tablets to consumers. Both producers and consumers benefited. The value of the tablets is the area under the demand curve up to the equilibrium quantity. The cost to produce that value is the area under the supply curve. The new value created by the transactions, i.e. the net gain to society, is the area between the supply curve and the demand curve, that is, the sum of producer surplus and consumer surplus. This sum is called social surplus , also referred to as economic surplus or total surplus. In Figure 1 we show social surplus as the area F + G. Social surplus is larger at the equilibrium quantity and price than it would be at any other quantity. This is what economists mean when they say that market equilibrium is (perfectly) allocatively efficient. At the efficient level of output, it is impossible to produce greater consumer surplus without reducing producer surplus, and it is impossible to produce greater producer surplus without reducing consumer surplus. In other words, the consumer and producers gains from exchange are maximized at the equilibrium point.

In this video, you’ll consider the holiday market for Santa hats. The market is efficient and both consumer and producer surplus are maximized at the equilibrium point of $5.

If the government establishes a price ceiling, a shortage results, which also causes the producer surplus to shrink, and results in inefficiency called deadweight loss .

If government implements a price floor, there is a surplus in the market, the consumer surplus shrinks, and inefficiency produces deadweight loss.

You can view the transcript for “Consumer and Producer Surplus- Micro Topic 2.6 (Holiday Edition)” here (opens in new window) .

Example: Calculate consumer surplus

Figure 2. Consumer and producer surpluses are shown as the area where consumers would have been willing to pay a higher price for a good or the price where producers would have been willing to sell a good.

In the sample market shown in the graph, equilibrium price is $10 and equilibrium quantity is 3 units. The consumer surplus area is highlighted above the equilibrium price line. This area can be calculated as the area of a triangle.

Recall that to find the area of a triangle, you will need to know its base and height. Refer to the following example if you need a refresher.

Figure 3. The area of a triangle.

Let’s apply the calculation for the area of a triangle to our example market to see the added value that consumers will get for this item at the equilibrium price in our sample market.

Step 1:  Define the base and height of the consumer surplus triangle.

The base of the consumer surplus triangle is 3 units long. Be careful when you define the height of this triangle, it is tempting to say it is 25, can you see why it isn’t? The height is determined by the distance from the equilibrium price line and where the demand curve intersects the vertical axis. The height of the triangle begins at $10 and ends at $25, so it will be $25 – $10 = $15

[latex] b = 3[/latex]

[latex] h = 15[/latex]

Step 2: Apply the values for base and height to the formula for the area of a triangle.

A = [latex]\frac{1}{2}b\times h[/latex]

A = [latex]\frac{1}{2}3\times 15[/latex]

A = [latex]\frac{1}{2}45[/latex]

A = [latex]\frac{45}{2} = 22.5[/latex]

• Modification, adaptation, and original content. Provided by : Lumen Learning. License : CC BY: Attribution
• Principles of Demand, Supply, and Efficiency. Authored by : OpenStax College. Located at : https://cnx.org/contents/[email protected]:yi4Ycqja@2/Demand-Supply-and-Efficiency . License : CC BY: Attribution . License Terms : Download for free at http://cnx.org/contents/[email protected]
• Deadweight Loss. Authored by : ACDCLeadership. Located at : https://www.youtube.com/watch?v=n0LXkA9kato&list=PL6B2DBE4C2FC8F845&index=12 . License : Other . License Terms : Standard YouTube License

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What Is Consumer Surplus?

Understanding consumer surplus, measuring consumer surplus.

• Consumer Surplus FAQs

The Bottom Line

Consumer surplus definition, measurement, and example.

Diane Costagliola is a researcher, librarian, instructor, and writer who has published articles on personal finance, home buying, and foreclosure.

Consumer surplus is an economic measurement of consumer benefits resulting from market competition. A consumer surplus happens when the price that consumers pay for a product or service is less than the price they're willing to pay. It's a measure of the additional benefit that consumers receive because they're paying less for something than what they were willing to pay.

Consumer surplus may be compared with producer surplus .

Key Takeaways

• A consumer surplus happens when the price consumers pay for a product or service is less than the price they're willing to pay.
• Consumer surplus is based on the economic theory of marginal utility, which is the additional satisfaction a consumer gains from one more unit of a good or service.
• Consumer surplus always increases as the price of a good falls and decreases as the price of a good rises.
• It is depicted visually by economists as the triangular area under the demand curve between the market price and what consumers would be willing to pay.
• Consumer surplus plus producer surplus equals the total economic surplus.

Investopedia / Crea Taylor

The concept of consumer surplus was developed in 1844 to measure the social benefits of public goods such as national highways, canals, and bridges. It has been an important tool in the field of welfare economics and the formulation of tax policies by governments.

Consumer surplus is based on the economic theory of marginal utility , which is the additional satisfaction a consumer gains from one more unit of a good or service. The utility a good or service provides varies from individual to individual based on their personal preference.

Typically, the more of a good or service that consumers have, the less they're willing to spend for more of it, due to the diminishing marginal utility or additional benefit they receive. A consumer surplus occurs when the consumer is willing to pay more for a given product than the current market price .

Many producers are influenced by consumer surplus when they set their prices.

The Formula for Consumer Surplus

Economists define consumer surplus with the following equation:

Consumer surplus = (½) x Qd x ΔP

• Qd = the quantity at equilibrium where supply and demand are equal
• ΔP = Pmax – Pd, or the price at equilibrium where supply and demand are equal
• Pmax = the price a consumer is willing to pay

The 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 Surplus

Consumer 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 or for their gain. 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 $300 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 consumer surplus and turning it into producer surplus or additional profits.

Is a High Consumer Surplus Good?

A high consumer surplus means that goods are priced quite a bit lower in the market than where consumers would ultimately be willing to pay. This is often the result of a high degree of competition, technological progress, and producer efficiency. In general, all of these things are considered to be "good" for promoting economic growth and prosperity.

What Is Producer Surplus?

Similar to consumer surplus, producer surplus is the economic benefit to producers of goods measured by the difference in market price and where the producer would be willing to sell. A producer surplus thus exists if the market price of a good is higher than the price the producer is willing to sell.

What Is Total Economic Surplus?

Total economic surplus  is equal to the producer surplus plus the consumer surplus. It describes the total net benefit to society from free markets in goods or services.

In free markets, producers compete with one another to be the low-cost producer and grab market share from other companies in their space. The result is more quantity and lower prices for consumers, often lower than where they would be willing to pay for it. This difference between the market price (as determined by supply and demand) and the willingness to pay is the consumer surplus. A consumer surplus is seen as a benefit to the economy.

• A Practical Guide to Microeconomics 1 of 39
• Economists' Assumptions in Their Economic Models 2 of 39
• 5 Nobel Prize-Winning Economic Theories You Should Know About 3 of 39
• Positive vs. Normative Economics: What's the Difference? 4 of 39
• 5 Factors That Influence Competition in Microeconomics 5 of 39
• How Does Government Policy Impact Microeconomics? 6 of 39
• Microeconomics vs. Macroeconomics: What’s the Difference? 7 of 39
• How Do I Differentiate Between Micro and Macro Economics? 8 of 39
• Microeconomics vs. Macroeconomics Investments 9 of 39
• Introduction to Supply and Demand 10 of 39
• Is Demand or Supply More Important to the Economy? 11 of 39
• Demand: How It Works Plus Economic Determinants and the Demand Curve 12 of 39
• What Is the Law of Demand in Economics, and How Does It Work? 13 of 39
• Demand Curves: What Are They, Types, and Example 14 of 39
• Supply 15 of 39
• The Law of Supply Explained, With the Curve, Types, and Examples 16 of 39
• Supply Curve: Definition, How It Works, and Example 17 of 39
• Elasticity: What It Means in Economics, Formula, and Examples 18 of 39
• Price Elasticity of Demand: Meaning, Types, and Factors That Impact It 19 of 39
• Elasticity vs. Inelasticity of Demand: What's the Difference? 20 of 39
• What Is Inelastic? Definition, Calculation, and Examples of Goods 21 of 39
• What Affects Demand Elasticity for Goods and Services? 22 of 39
• What Factors Influence a Change in Demand Elasticity? 23 of 39
• Utility in Economics Explained: Types and Measurement 24 of 39
• Utility in Microeconomics: Origins, Types, and Uses 25 of 39
• Utility Function Definition, Example, and Calculation 26 of 39
• Definition of Total Utility in Economics, With Example 27 of 39
• Marginal Utilities: Definition, Types, Examples, and History 28 of 39
• What Is the Law of Diminishing Marginal Utility? With Example 29 of 39
• What Does the Law of Diminishing Marginal Utility Explain? 30 of 39
• Economic Equilibrium 31 of 39
• What Is the Income Effect? Its Meaning and Example 32 of 39
• Indifference Curves in Economics: What Do They Explain? 33 of 39
• Consumer Surplus Definition, Measurement, and Example 34 of 39
• What Is Comparative Advantage? 35 of 39
• What Are Economies of Scale? 36 of 39
• Perfect Competition: Examples and How It Works 37 of 39
• What Is the Invisible Hand in Economics? 38 of 39
• Market Failure: What It Is in Economics, Common Types, and Causes 39 of 39

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ECON101: Principles of Microeconomics (2021.A.01)

Consumer and producer surplus.

Read this article and attempt several practical problems related to consumer and producer surplus by answering the "Try It" quiz questions. Check your answers after you're done.

7.1. Answers to Try It

• $6,000 Incorrect The producer surplus is the area above the supply curve below the market price ($3). The area is [$(3-1) x 2000 ]/2= $2,000. Make sure you use the right formula to calculate the producer surplus. Don't confuse it with the social surplus that is the area below the demand curve and above the supply curve or the producer surplus + the consumer surplus..
• $2,000 Correct The producer surplus is the area above the supply curve below the market price ($3). The area is [$(3-1) x 2000 ]/2= $2,000.
• $4,000 Incorrect The producer surplus is the area above the supply curve below the market price ($3). The area is [$(3-1) x 2000 ]/2= $2,000. Make sure you use the right formula to calculate the producer surplus. Don't confuse it with the consumer surplus that is the area below the demand curve and above the market price line.
• $4,000 Incorrect The social surplus is the area area below the demand curve and above the supply curve or the producer surplus + the consumer surplus. Make sure you use the right formula to calculate the producer and consumer surplus.
• $12,000 Incorrect The social surplus is the area area below the demand curve and above the supply curve or the producer surplus + the consumer surplus. Make sure you use the right formula to calculate the producer and consumer surplus.
• $6,000 Correct. The social surplus is the area area below the demand curve and above the supply curve or the producer surplus + the consumer surplus.($3). The producer surplus is [$(3-1) x 2000]/2= $2,000. The consumer surplus is [($7-3) * 2000] 12 = $4000. The social surplus = $6,000

Example Solved Problems with Answer, Solution, Formula - Integration: Consumer’s surplus | 12th Business Maths and Statistics : Chapter 3 : Integral Calculus - II

Chapter: 12th business maths and statistics : chapter 3 : integral calculus - ii, integration: consumer’s surplus.

Consumer’s surplus:

This theory was developed by the great economist Marshal. The demand function reveals the relationship between the quantities that the people would buy at a given price. It can be expressed as p = f ( x )

Let us assume that the demand of the product x = x 0  when the price is p 0 . But there can be some consumer who is ready to pay q 0 which is more than p for the same quantity x 0 . Any consumer who is ready to pay the price more than p 0 gains from the fact that the price is only p 0 . This gain is called the consumer’s surplus.

It is represented in the following diagram

Mathematically the Consumer’s Surplus (CS) can be defined as

CS = (Area under the demand curve from x = 0 to x = x 0 ) – (Area of the rectangle OAPB)

Example 3.27

The demand function of a commodity is y = 36 − x 2 . Find the consumer’s surplus for y 0 = 11

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How To Calculate Consumer Surplus (With Examples)

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Understanding economic supply and demand provides valuable insight into any given market. You’ve probably seen a basic demand-supply graph used to illustrate the relationship between a product’s market price and the quantity demanded by consumers.

Consumer surplus and producer surplus are important pieces of the equation. Markets tend to fluctuate, especially because consumers are able or willing to spend at different price points for any given product or service. This is where a surplus is created.

Key Takeaways:

To calculate consumer surplus you need to know the difference between the cost consumers are willing to pay for a product or service and the actual market price.

To calculate extended consumer surplus you need to know the difference between the price the consumer is willing to pay and the price at equilibrium on the supply and demand curve, then multiply this by 0.5 the quantity at equilibrium where supply and demand are equal.

Producer surplus is the difference between the minimum price a producer is willing to accept for their goods or services and the final price they receive.

A social surplus is the sum of consumer surplus and producer surplus.

Price floors set a minimum on a price. Price ceilings set a maximum on a price. Both are tools enforced by governments when they feel their benefits outweigh their market inefficiencies.

What Is Consumer Surplus?

How to calculate consumer surplus, what is producer surplus, how to calculate producer surplus, price discrimination, what is social surplus, how do price floors and price ceilings affect the market, frequently asked questions, final thoughts.

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Based on the economic theory of marginal utility , consumer surplus is an economic measurement calculating the excess cost that consumers are willing to pay for a product or service in comparison to the actual market price.

For a better picture, let’s look at an example:

A shopper is browsing for a new television. Specifically, she wants a 42” OLED smart TV, and she’s set a maximum budget of $1,300. To her joy and surprise, she finds a television meeting all of her exact requirements for only $950. That $350 cost difference of what she paid versus what she was willing to spend is her consumer surplus, which she is now free to spend on other products, goods, or services. To put it in the simplest terms, consumer surplus is when you think you got a good deal because you paid less than you were expecting to.

When looking at a demand-supply graph, the demand curve is always going to be sloping downward due to the law of diminished marginal utility. We can measure consumer surplus with the following basic formula:

Consumer surplus = Maximum price willing to spend – Actual price

In our earlier example with the television, we can see that consumer surplus equals $1,300 minus $950 to give us a total of $350 for our surplus.

On a larger scale, we can use an extended consumer surplus formula:

Consumer surplus = (½) x Qd x ΔP

Qd = the quantity at equilibrium where supply and demand are equal

ΔP = Pmax – Pd

Pmax = the price a consumer is willing to pay

Pd = the price at equilibrium where supply and demand are equal

If this formula looks vaguely familiar, that’s because we’re actually solving for the area of the consumer surplus triangle on a demand-supply graph. As a reminder, the formula to calculate the area of a triangle is (½) x base x-height.

But then why does the consumer surplus formula require subtraction?

Good question. Keep in mind that the height of the triangle we’re solving for isn’t starting at 0 on the graph. Instead, it’s determined by the distance from the equilibrium price to the point where the demand curve intersects with the vertical axis. Because of this, our height is going to be the difference between those two points rather than the value of the topmost point on the axis.

Let’s take a look at an example using the extended formula.

A customer is willing to spend $8.00 on a new energy drink, but most customers are willing to pay only $5.00, which is the equilibrium point where supply meets demand. At a $5.00 retail value, the company supplies a store with 500 bottles to meet the demand. Plugging these values into our formula gives us (½) x 500 x ($8 – $5) for a total of $750 consumer surplus shared among the customers who made a purchase at the equilibrium price point. Those savings can go toward other products and services.

Supply and demand are all about balance, so the opposite side of the equation results in a producer surplus, which is the difference between the minimum price a producer is willing to accept for their goods or services and the final price they receive. A surplus happens when market prices exceed the lowest price point that a producer will accept.

Let’s look at an example to better understand producer surplus.

A car manufacturer decides to produce 10,000 of its newest sports model this year. Over the past few years, the standard selling price has been $90,000 for this type of vehicle, but this year, the economy is stronger than it’s been in the past, and many consumers are paying more, up to $150,000 in some cases since the supply is limited and the demand is higher than expected. If a car buyer spends $150,000 on a vehicle instead of the expected $90,000, the difference of $60,000 is the producer surplus. In simplest terms, producer surplus happens when a producer receives more revenue than expected for a good or service.

When looking at a demand-supply graph, the supply curve is always going to be sloping upward due to the law of increasing returns. We can calculate producer surplus with this formula:

Producer surplus = Total revenue – Total cost

Understandably, producers can’t earn a profit if they aren’t able to recoup at least the marginal cost they spent to produce and transport their products. A free market has this natural push-pull effect that prevents either the consumer or the producer from fully dictating price points.

However, some businesses are able to take advantage of price discrimination in order to increase company profits.

This selling strategy involves charging different prices for the same goods or services based on the business’s estimation of the maximum amount they think the customer is willing to pay.

For example, suppose you’re looking at renting a house on the beach for a week. In that case, the exact same house is going to cost a lot more if you’re renting during peak tourist season versus the off-season when the renter is desperately trying to prevent the house from sitting empty.

Most brand-name goods know that there’s power in a name and people are willing to pay much more to be “on brand” rather than buy a cheaper, almost identical alternative that’s lacking a famous logo.

Airlines are also notorious for price discrimination. They know that people are willing to pay more for convenience.

Because there’s less of a demand for early morning and late-night flights, the airline is able to price fares differently depending on the time of day, even though the cost of flying and fueling a plane from Destination A to Destination B isn’t going to change. This is called the elasticity of demand.

Also referred to as economic surplus or total surplus, a social surplus is the sum of consumer surplus and producer surplus. When looking at a demand-supply graph, the social surplus is the total area between the supply curve, the demand curve, and the point of equilibrium.

A deadweight loss, which occurs when the economy is producing at an inefficient quantity, is the loss in total surplus.

When the market is operating at optimal efficiency, it’s impossible to increase consumer surplus without reducing producer surplus, and it’s also impossible to improve producer surplus without lowering consumer surplus.

Total surplus is larger at equilibrium quantity and price than it would be at any other quantity and price.

A healthy market is able to adapt and settle naturally on an equilibrium point that balances price and quantity. Imposing a price floor or ceiling prevents the market from adjusting to its ideal point of equilibrium and maximum efficiency while also transferring some of the consumer surplus to producers and vice-versa.

A price ceiling is a maximum price a producer is allowed to charge consumers in exchange for a good or service .

The government’s impact on the drug market is an excellent example of price ceilings. Let’s say that a pharmaceutical company created a new life-saving drug. The market-price equilibrium, if left to the free market without any restrictions, would be $800, with an expected 50,000 people using the drug per month.

But the government wants to make the drug more affordable, so it imposes a price ceiling at $500.

So, what happens?

First, the pharmaceutical company is going to produce a lower amount of product. Their supply is going to reflect the price ceiling line on the graph instead of the market equilibrium point. This reduces the social surplus and increases deadweight loss. Basically, money is being discarded without benefitting anyone.

In addition, some of the producer surpluses end up being transferred to consumers, which is why consumers largely favor price ceilings. However, the gain to consumers is less than the loss to producers, aka still a deadweight loss. The market is not operating as efficiently as it could be.

A price floor is the lowest price that can legally be paid for goods or services.

For example, let’s say the city government is concerned about a historical theater going out of business. It has a long tradition of providing entertainment to the community giving local musicians and actors a place to perform. The government decides to set a minimum ticket price at $10 for performances.

As a result of the higher price per ticket, demand for tickets falls. The theater had been selling 1,500 tickets for $7 at the equilibrium point, but now they’re selling 1,100 for $10. Although the price floor caused some of the consumer surplus to be transferred to the producer, which is why producers often favor price floors, the market is still looking at an overall deadweight loss.

Is there any benefit in understanding consumer surplus?

Yes, there is a great benefit to understanding consumer surplus. If you are a consumer, knowing about consumer surplus empowers you to make smart long term definitions. For example, if you buy a product at a price less than you’re willing to spend, you know you have a consumer surplus. This concept can guide you to a decision to either spend or save that “surplus” based on your needs and wants.

Who is affected by consumer surplus?

Consumers and producers are affected by consumer surplus. A consumer is obviously affected by a consumer surplus because it provides a concept on how to approach paying for goods or services. Similarly, a producer needs to consider the difference in which they are willing to set a price against what is the greatest amount of goods or services they can sell. This in part is based on the where the consumer surplus ends at equilibrium.

The market is fluid. When it’s allowed to operate freely, consumers and producers tend to push and pull until equilibrium is reached and the market is able to regulate its supply and demand with maximum efficiency .

Understanding the basics of supply and demand; consumer, producer, and social surplus; price discrimination; deadweight loss; price ceilings; and price floors are critical to making comprehensive business decisions about quantity and pricing.

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Chris Kolmar is a co-founder of Zippia and the editor-in-chief of the Zippia career advice blog. He has hired over 50 people in his career, been hired five times, and wants to help you land your next job. His research has been featured on the New York Times, Thrillist, VOX, The Atlantic, and a host of local news. More recently, he's been quoted on USA Today, BusinessInsider, and CNBC.

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Russia’s battle with water pollution continues

Source: Getty Images/Fotobank

Every third sample from sources of drinking water in Russia fails to meet acceptable standards due to chemical contamination, according to Russian consumer watchdog agency Rospotrebnadzor. Moreover, nearly half of Russia’s population lacks safe drinking water. As recently reported by Greenpeace, water pollution is widespread: “Thousands of companies have dumped dangerous chemicals into rivers and lakes, and these pollutants are inevitably absorbed into the human body through water and food.” According to Greenpeace, “Companies are not adopting clean technologies, and the government is ineffectual when it comes to preventing criminals from poisoning the water.”

At the same time, in recent years the number of companies in Russia that offer unique technologies for purifying water, including water with radioactive contamination, is increasing. In late August, RosRAO, a subsidiary of Rosatom, qualified to participate in research to determine the technologies that will be the most effective in purifying the polluted water from the Fukushima-1 nuclear power plant. The Japanese government will invest more than $9.5 million in this research.  

Private companies offer new solutions

More and more, small companies are offering innovative new solutions for water purification.  Recently, a team of former equipment suppliers to Gazprom, Russia’s largest energy company, implemented a new solution developed by the Novosibirsk Institute of Mining. The result is Aquifer, a complex water purification system.  

The Novosibirsk Institute’s new technology is an ejector-dispersant that stirs the water intensively, saturating it with oxygen. The system has no mechanical moving parts, and as a consequence will save a significant amount of energy. Moreover, it will reduce the amount of hypochlorite needed to oxidize iron and other impurities. Aquifer will oxidize all light impurities with air and kill bacteria through electrolysis. Earlier, as a rule, similar technology was used in large-scale water treatment systems. The Aquifer system is unique in that it can be used by smaller companies that consume 20-50 cubic meters of water per day.

Making water safe to drink

The Aquifer idea came to Pyotr Mikheev at the beginning of the 2000s, when he and two of his partners were supplying water treatment equipment to Gazprom camp sites. “We got together $100,000 in personal funds to launch assembly plants,” Mikheev said.

In order to make water potable, there are several classic methods: chlorination, ozonation, UV treatment, ultrafiltration, and electrolysis. Unfortunately, chlorine is dangerous to store, transport, and use because it is a poisonous substance.

Since the end of the 20 th  century, ultraviolet light and ozone have been used in purification. But ozone is poisonous, and ultraviolet light purifies water only near the source. Already within a meter and a half, nothing of this effect is left in the water flow. Therefore, when using this method, a chlorination installation has to be added to the purification cycle. Ultraviolet lamps are longitudinally complex, and the surfaces require constant cleaning. Electrolysis is still the safest and most effective method of disinfecting.  

Technical details

There is another technological subtlety used in the system. The developers combined electrolysis with dispersion (stirring water) and dramatically increased the efficiency with which impurities are oxidized. This is important, because water from underground sources is usually almost free of bacteria but contains a significant amount of iron and other impurities that must be oxidized.

Usually in large water treatment plants, this is done with the help of oxygenation or by a catalyst, oxidizing iron. But these methods have disadvantages: catalyst loading is expensive and requires constant replenishment, while oxygen saturation requires an electric compressor to be constantly running. This makes for high energy costs. But then came the convenient solution invented by the Novosibirsk Institute of Mining.

The Aquifer is installed in modules, or “cubes,” depending on the composition of the water and the purification requirements. If, for example, desalination is necessary, it is added at the corresponding stage. If the water is underground, the decontamination unit is removed, or the deferrization module if the water is on the surface. The technology can be used not only for potable water supply systems, but for treating domestic and industrial wastewater and swimming pools.

Two Aquifer units are already in operation in Surgut and Yakutsk, plus another in Elektrostal near Moscow for purifying water used in industrial processes. Many industries have the same problem in Russia: the water contains too many impurities to be used in industrial processes. 

By Sophie Terekhova, Russian Startup Rating , special to RBTH

All rights reserved by Rossiyskaya Gazeta.

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