The Consumer Surplus and the Unit of Measurement
3 Pages Posted: 20 May 2019
Date Written: April 26, 2019
In this note, we review estimating the consumer surplus for a good or service using linear or Tobit regression. Assuming the consumer surplus is found using one of these models, we prove a theorem that if the price quoted and quantity purchased change inversely, then the consumer surplus does not. Finally, we demonstrate the theorem using an abstract example with sample data.
Keywords: consumer surplus, demand curve, linear regression
JEL Classification: C51, H41
Suggested Citation: Suggested Citation