The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Consumer Surplus

  • Daniel T. Slesnick
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_626

Abstract

Over the years, consumer surplus has been used to measure the welfare effects of price and income changes. Despite its widespread use, it provides a measure of well-being that is ordinally equivalent to the change in utility only under conditions that are inconsistent with long-standing empirical evidence. Hicksian surplus measures, such as the equivalent or compensating variations, provide exact indicators of the change in utility without such restrictions. Beginning in the early 1980s, empirical methods have been developed to estimate the equivalent variation that has the same data requirements as consumer surplus.

Keywords

Aggregation Compensating variation Consumer surplus Equivalent variation Expenditure function Indirect utility function Integrability of demand Intertemporal welfare effects Linear expenditure system Marginal utility of income Representative agent Roy’s identity Social choice Social expenditure function Well-being 

JEL Classifications

D11 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Daniel T. Slesnick
    • 1
  1. 1.