What is defined as the difference between what consumers are willing to pay for a product and what they actually pay?

The concept defined as the difference between what consumers are willing to pay for a product and what they actually pay is known as consumer surplus. This measure reflects the benefit that consumers receive when they purchase a product for less than the maximum price they are willing to pay.

When demand is represented graphically, the area above the market price and below the demand curve illustrates consumer surplus. It is an important concept in welfare economics, as it helps to assess the overall well-being of consumers in a market. Essentially, consumer surplus indicates the extra utility or value that consumers gain from a transaction, where they feel satisfied by paying less than their maximum willingness to pay.

Understanding consumer surplus helps analyze market efficiency and the benefits received by consumers within the context of supply and demand dynamics.