Criticisms Of Consumer's Surplus

Advanced Content Marketing Certification Training
The concept of consumer's surplus has been criticized on several grounds as follows:

1. Imaginary
The concept of consumer's surplus is a purely imaginary idea. We just imagine what we are prepared to pay and subtract what we actually pay. It is all hypothetical.

2. Utility is not measurable
The concept of consumer's surplus is based on the assumption that utility can be measured quantitatively in term of money. But utility is a subjective concept. Therefore, utility cannot be measured quantitatively.

3. Marginal utility of money not constant
The concept of consumer's surplus supposes that the marginal utility of money remains constant throughout the process of exchange. But the marginal utility of money does not remain constant. When a consumer spends his given money income on the purchase of a commodity, the amount of money left him is reduced and its marginal utility to him increases. While calculating consumer's surplus, we do not take into consideration this change in the marginal utility of money.

4. Not applicable to necessaries
The concept of consumer's surplus does not apply to necessaries of life or conventional necessaries. The price of necessaries is very low whereas utility derived from them is very high. Therefore, consumer's surplus from them is infinite when a man is dying of thirst, he may be prepared to pay any amount of money for a glass of water.

5. Neglect complementary commodities
Marshall assumes that the utility of a commodity depends upon the supply of that commodity alone. He neglect the problem of complementary of commodities. Thus, he considers one commodity as independent of the others.

6. Neglect Substitutes
This concept assumes the absence of substitutes of the commodity from which the consumer derives the surplus because the presence of substitutes like tea and coffee would make the measurement of consumer's surplus difficult.

Related Posts
Concept Of Consumer's Surplus
Significance Of Consumer's Surplus

No comments:

Post a Comment