Question

Explain the concept of consumer's surplus with the help of marginal utility analysis ? What
are the difficulties in this measurement

Answer 1

• The concept of consumer surplus is derived from the law of diminishing marginal utility. As per the law, as we purchase more of a commodity, its marginal utility reduces. Since the price is fixed, for all units of the goods we purchase, we get extra utility. This extra utility is consumer surplus.

• Six major difficulties faced in the measurement of national income are as follows: 1. problems of definition, 2. lack of adequate data, 3. non-availability of reliable information, 4.