Consumer Surplus.

Consumer Surplus may be defined as the excess of utility obtained by the consumer over utility obtained by the consumer over utility forgone or disutility suffered.

It is measured by the difference between the maximum price which the consumer is willing to pay for a commodity rather than go without it and the price which he actually pays for it .

Marshall defined it as " The excess of price which a person would be willing to pay rather than go without the thing, over that which he actually does pay is the economic measure of this surplus of satisfaction. It may be called as

Consumer Surplus".

Types of Utility

Cardinal Utility: 

It gives numbers 1,2,3,.... It assumes that utility can be measured and utility from the two  i commodities can be compared. For eg. Let's take two commodities orange and apple. Orange gives utility of 20 units where as apple gives utility of 10 units. Orange is giving 2 X  more utility as compared to apples.

Ordinal Utility: 

The consumer gives order or rank to the utility. It does not give numbers but order, for eg , 1st, 2nd,3rd........etc. It gives the preference of the consumer when he ranks commodities according to the utility derived.

Introduction to Economics

My blog, Fundamentals of Economics, aims to help students understand the complex and abstract concepts, theories and models in Economics. As the subject is very comprehensive, therefore the scope of elaboration increases.The blog will be using real life examples to help you understand the key concepts of Economics.

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DEFINITION OF ECONOMICS

Economics as a science was born in 1776, with Adam Smith's magnum opus- An Inquiry into the nature and causes of Wealth of Nations. Economics was derived from the Greek words 'Oikos' (a house) and  'nemein' ( to manage) which meant, managing a household with the limited available resources in the best possible manner. 

There are are there are are plenty of definitions of Economics but broadly they can be classified into four groups;

1) Wealth,

2) Welfare,

3) Scarcity and

4) Growth.