Effect of change in demand on consumer surplus
Student-written example
Shared for study and reference. Not a sample of our professional writing.
About this example
This assignment was contributed by a student. The views expressed are the author’s and do not necessarily reflect those of UKEssays. Use it to inform your reading and develop your own work.
Question
explain the likely impact on consumer suplus of a change in demand
Answer
As a concept the importance of consumer demand and supply play a vital role in business economics. Research conducted by Buvik (2001) states that the relevance of consumer demand plays a critical role on the overall market and consumption of a product. Consumer surplus refers to the gap between the price that is paid by the consumes compared with the value of the product. Besanko (2012) highlights that as a concept, consumer surplus allows firms and markets to understand the welfare gain from consuming various goods or services. A key measure utilised by various organisations is effectively using consumer surplus to set the pricing of products. This is linked with the change in supply based on demand and introduces the concept often termed as ‘price discrimination’ enabling firms to control the price of a product based on consumer interest and developing a producer surplus in the process.
As the demand curve shifts the overall level of consumer surplus also changes. A higher supply cost essentially reduces consumer surplus while an increased demand causes the consumer surplus to rise. This means that as the demand of a commodity rises, the consumer surplus as the willingness to pay for a product or service also increases indicating a rise in consumer surplus. (Besanko, 2012)
References
Besanko, D. (2012) Economics of Strategy, 6th Edition, New York: Wiley
Buvik, A. (2001) “The industrial purchasing research framework: a comparison of theoretical perspectives from micro economics, marketing and organization science”, Journal of Business & Industrial Marketing, Vol. 16 Iss: 6, pp.439 – 450
UKEssays writing support
Need support with your own question?
Our experienced academic writers hold at least a 2:1 degree from a reputable university, with most exceeding this minimum.
Send us your question and, if you wish, any marking criteria. We’ll write a model answer to your brief.
Cite This Work
To export a reference to this article please select a referencing stye below:
Related Services
View all
DMCA / Removal Request
If you are the original writer of this assignment and no longer wish to have your work published on UKEssays.com then please click the following link to email our support team:
Request essay removal