Question

Write down three limitations of consumer’s surplus.

Answer 1

1. The consumer’s surplus cannot be measured exactly because it is difficult to measure the marginal utility of different units of a commodity consumed by a person.
2. In the case of necessaries, the marginal utilities of the earlier units are infinitely large. In such case, the consumer’s surplus is always infinite.
3. There is no simple rule for deriving the utility scale of articles which are used for their prestige value (e.g., diamonds).