Consumer's Surplus and Demand in General

In general, we identify the consumer's surplus in any demand diagram as the area between the demand curve and the price line, to the left of the quantity sold. With a linear approximation to the demand curve, the consumers' surplus is an area of triangular shape, as the shaded area in the diagram below. We sometimes speak of this as "the consumers' surplus triangle" or "the welfare triangle." (The term "the welfare triangle" is used because this approach can be used to balance the benefits from buying one good against other aspects of the consumer's well-being or "welfare."

Figure 4. Consumers' Surplus in General

The demand curve gives more information for benefit-cost analysis. In an approximate sense, the area under the demand curve is the consumer's total benefit from consuming the good, and the area between the demand curve and price line is her net benefit, that is, consumer's surplus.