Arsène Jules Étienne Juvenel Dupuit introduced the concept of consumer’s surplus in 1844. It was further developed by Alfred Marshall in his famous book “Principles of Economics” in 1890. Prof. Boulding named it ‘Buyer’s Surplus”. In general, consumer surplus is realized in highly useful but relatively cheap commodities. Consumer surplus is defined as the difference between what a consumer has prepared to pay and what actually s/he pays for a commodity in the market.
Consumer surplus is the benefit that the consumer receives over what he is willing to pay for a product and what he actually pays. Consumer surplus is thus the gap between willingness to pay and the actual price of the product. Willingness to pay is the maximum amount that a buyer will pay for a good. The willingness to pay for a consumer is based on the need or worth or utility of any product.
Therefore, it measures the benefit buyers receive from participating in a market. It can be calculated by using the given formula;
Consumer Surplus (C.S) = Value of Buyers or Willingness to Pay- Amount Paid by Buyers or Actual Price Paid by Consumer
The PDF file of a brief discussion on the matter is available below.