Consumer surplus is an economic measure of a customers excess benefit, also known as buyers surplus. It is the difference between the maximum price that a consumer is willing to pay for a given quantity of a product or service and the market price that the consumer actually has to pay. Consumer surplus is based on the economic theory of marginal utility, which is the additional satisfaction a person derives by consuming one more unit of a product or service. The satisfaction varies by consumer, due to differences in personal preferences. According to the theory, the more of a product a consumer buys, the less willing he/she is to pay more for each additional unit due to the diminishing marginal utility derived from the product.

Consumer surplus can be calculated by analyzing the difference between the maximum price a consumer is willing to pay and the actual market price paid for a product or service. It can be used to measure the value of a product or service and is an important tool used by governments in the Marshallian System of Welfare Economics to formulate tax policies. Consumer surplus is also used by monopolies when deciding the price to charge for their product.

Consumer surplus for a product is zero when the demand for the product is perfectly elastic, meaning consumers are willing to match the price of the product. When demand is perfectly inelastic, consumer surplus is infinite because a change in the price of the product does not affect its demand. Consumer surplus is infinite when the demand curve is inelastic and zero in case of a perfectly elastic demand curve.

To calculate consumer surplus, you need to know the demand curve for a product or service and the market price. The formula for calculating consumer surplus is the difference between the maximum price a consumer is willing to pay and the actual market price paid, multiplied by the quantity purchased.

$$Consumer\ Surplus = (Maximum\ Price\ a\ Consumer\ is\ Willing\ to\ Pay - Market\ Price)\times Quantity\ Purchased$$

Consumer surplus is a useful concept in economics as it helps to understand the benefits that consumers receive from a product or service.