When there is a difference between the price that you pay in the market and the value that you place on the product, then the concept of consumer surplus becomes a useful one to look at.
Consumer surplus is a measure of the welfare that people gain from consuming goods and services
Consumer surplus is the difference between the total amount that consumers are willing and able to pay for a good or service (indicated by the demand curve) and the total amount that they actually do pay (i.e. the market price).
Consumer surplus is shown by the area under the demand curve and above the price.
Consumer surplus and price elasticity of demand
When there is a shift in the demand curve leading to a change in the equilibrium market price and quantity, then the level of consumer surplus will change too
Price discrimination and consumer surplus
Price discrimination and market power
One of the main arguments against firms with monopoly power is that they can exploit their monopoly position by raising prices in markets where demand is inelastic, extracting consumer surplus from buyers and increasing profit margins at the same time.
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