What Is Consumer Surplus?

Consumer surplus is the net benefit which the consumers get by the consumption of goods or services in exchange of money. It is the difference between the price which consumers are willing to pay and the actual price of the product or service. The price which consumers are willing to pay is known as reservation price and if actual price is less than the reservation price of the consumers then it means that consumers have achieved more than what they were willing to pay. This saving of consumers is known as consumer surplus. Another related concept is the producer surplus. If the actual price is greater than the reservation price of the producers then it is known as Producer surplus.