The Consumer Surplus and the Unit of Measurement

Abstract

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