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Unformatted text preview: between the two areas would be the area of the triangle DRP (DRQO - PRQO = DRP). This is the surplus satisfaction that the consumer enjoys. The numerical value of the consumers’ surplus in our example is 6 units. However, the geometrical measure of the surplus is somewhat larger. It is equal to the area of the triangle DRP (half the base into altitude) = ½ (PR x PD). PR = OQ = 4 and PD = OD - OP = 6 - 2 = 4. The geometric value of consumers’ surplus is ½ (4 x 4) = 8 which is larger than 6. Consumers’ Surplus is considered a somewhat hypothetical or imaginary concept. It has considerable importance in framing practical policies such as those of taxation, foreign trade , welfare promotion etc....
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- Fall '10
- Utility, Complex number, Euclidean geometry, Surplus intra-marginal units, triangle DRP