Economics 12 Notes for Economics Notes

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Criticism of Consumers’ Surplus

Criticism of Consumers’ Surplus:

1. Title of consumers surplus is wrong: In consumer surplus we study the utility or surplus received while purchasing the commodity. Therefore, according to Prof. Boulding it should be named as Buyer’s surplus instead of consumers’ surplus.

2. Imaginary concept: According to critics, it is an imaginary concept because a person can only imagine that he/she is getting more satisfaction than the payment has made. In reality nobody is ready to pay than the actual price.

3. Utility can’t be measured in numbers: Utility derived from the consumption of commodity can’t be expressed in terms of number.

4. Potential price may be less than actual price: If the potential price is less than actual price at that time, there is no possibility of consumer surplus. This is because there is no guarantee that there will always be surplus.

5. Constant marginal utility of money: In consumer surplus, marginal utility of money is constant but practically the utility of money depends on the volume of money.

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