Eli5: Why consumer surplus is shown under demand curve and above selling price ?

Question

Eli5: Why consumer surplus is shown under demand curve and above selling price ?

In: Economics

Answer 1

The demand curve tells you what the consumer would be willing to give up to get the product. The selling price tells you what the consumer actually gives up. The difference between the two is essentially what the consumer gets without paying for it. Like, if I thought a house is worth a million, but I only pay 600,000 for it, I’ve essentially gotten 400,000 of value for free. That’s the surplus.

Now go do your own homework.