Who benefits from a consumer surplus?

1 Answer
Oct 21, 2015

It benefits a Monopolist and finance minister.


Consumer surplus is the difference between the amount the consumer is willing to pay and the price he actually pays.
So the direct benefit goes to the consumer.

But is useful to a monopolist in discriminating the price. He can charge the price the consumer is willing to pay from each consumer. This is known as First degree Price discrimination.

It is equally useful to the finance minister while imposing tax on a commodity. If he feels that consumers find a high consumers' surplus in some commodities, he can impose a higher level of tax and collect more revenue to the government.