Chapter 6 An important concept developed in Chapter 6 is consumer surplus. Consumer surplus reflects the idea that sometimes - actually, usually - you get more than what you pay for. More precisely, consumer surplus equals the difference between the value a consumer places on a unit of a product and how much the consumer actually has to pay for the unit. To see how consumer surplus is measured, take three students, Alfred, Betty, and Charles. Alfred is really hungry and so is willing to pay $4 for his first slice of pizza for lunch. Betty is a bit less hungry; she is willing to pay only $3 for her first slice of pizza at lunch. Charles is the least hungry of the bunch, so he is willing to pay only $2 for his first lunch time slice. All three students are on diets, so each will buy at most only one slice. The demand curve in the figure illustrates the situation outlined above. If the price is $5, no one buys a slice of pizza and so the quantity demanded is zero. If the price is $4 per slice, only one slice is demanded because Alfred buys a slice and this price/quantity demanded combination is labeled a. At $3 per slice, two slices are demanded with both Alfred and Betty buying a slice. This combination is labeled b. And, at $2 per slice, three slices are demanded at point c with all three students buying a slice. Say that the price of a slice of pizza is $5. As the figure shows, Alfred, Betty, and Charles are all unhappy because none of them will buy a slice of pizza when the price is $5. There is no consumer surplus because no one is buying a slice of pizza. Suppose that the price falls to $4 per slice of pizza. What happens? To find out, click on point a in the figure.