It is always nice to save money when purchasing certain products. Although sometimes it seems this can be quite the opposite.
Consumer Surplus is the difference between the maximum price consumers are willing to pay for an additional unit of that certain product and the market price at which it is set. The Consumer Surplus is found above the market price but below the demand curve. The higher the market price is, the less consumer surplus will result.
In a Perfectly Competitive Market, producers want to get more producer surplus and diminish consumer surplus but finding the equalibrium can be challenging. By raising their market price they will eliminate the consumer surplus which can also create a Deadweight Loss. The Deadweight Loss happens when marginal costs exceed marginal revenue and marginal benefit.
Different types of pricing strategies can enable companies to get the most out of their products in the market. Price Discrimination is one of the best ways for a company to find this equalibrium price by using information obtained from research to target certain markets. These prices are not reflected by the costs differences. Is consumer surplus maybe a good thing for companies to hold onto? Without consumer surplus, consumers will try and find other means of buying that same product, and loss of consumers could hurt profits. Only in monopolistic companies would this not be detrimental too because there would be no possible equal substitutes.
Consumer Surplus is the difference between the maximum price consumers are willing to pay for an additional unit of that certain product and the market price at which it is set. The Consumer Surplus is found above the market price but below the demand curve. The higher the market price is, the less consumer surplus will result.
In a Perfectly Competitive Market, producers want to get more producer surplus and diminish consumer surplus but finding the equalibrium can be challenging. By raising their market price they will eliminate the consumer surplus which can also create a Deadweight Loss. The Deadweight Loss happens when marginal costs exceed marginal revenue and marginal benefit.
Different types of pricing strategies can enable companies to get the most out of their products in the market. Price Discrimination is one of the best ways for a company to find this equalibrium price by using information obtained from research to target certain markets. These prices are not reflected by the costs differences. Is consumer surplus maybe a good thing for companies to hold onto? Without consumer surplus, consumers will try and find other means of buying that same product, and loss of consumers could hurt profits. Only in monopolistic companies would this not be detrimental too because there would be no possible equal substitutes.
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