Let's have an example of an application of consumers' surplus in cost-benefit analysis. We might do a cost-benefit analysis of the introduction of a new good. The consumers' surplus from the good is the benefit to consumers from its introduction, and so a major component of the total benefits. We could to a statistical estimated of the demand curve for the new product and derive the consumers' surplus from that, and add that to the other benefits (business profits, perhaps increased pay, and so on) to get the overall benefits from the introduction of the new good.
As an example, we could use Video Cassette Recorders, VCR's. In fact VCR's were introduced a few years ago. How much do consumers benefit from the introduction of VCR's?
Suppose D is the demand for VCR's and p is the price for which they sell. Before VCR's were introduced, consumers of course got no benefit from them at all. After they are introduced, consumers get a surplus indicated by the area of the shaded triangle. That is their net benefit from buying VCR's and is the consumers' benefit from the introduction of the new good.
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