A Theory of Consumers Surplus and Example of Surplus of Consumers

Surplus of consumers are considered as the significant in the cost-benefit to analysis on the public investment for the welfare of the society. Rate of the product is always less than what a person is willing to pay for it. The difference between consumers wills to pay and those actual pays lead to satisfaction which is consumer surplus.

On the other hand, surplus of producer exists when actual price exceeds the minimum price that the seller is ready to accept. Resource owners usually captured producer’s surplus.

Meaning of Consumer Surplus:

At first, Marshall had proposed the theory of consumer surplus which is based on demand theory. He states, consumer surplus is a part of the benefit, which a person derives from his environment or conjuncture. The price, which a person pays for a product is always less than what he is willing to pay for it.

So, the difference between the amounts of consumer is willing to pay and what he actually pays is known as the satisfaction which is consumer surplus. Take an example of consumer surplus –

If a consumer is willing to pay Rs. 5 for one orange and the actual price is Rs. 3, then the consumer surplus is Rs. 2.



In this diagram, the DD1 is the curve for a commodity. If OP1 is the price then the quantity demand is OQ1. The consumer is ready to pay OD price but actually he pays OP1. So the consumer surplus is P1R1D, (Q1R1D-OP1R1Q1 = P1R1D).

Now, let us assume that the price comes down to OP2. In this situation, the quantity demanded will increase to OQ2; that is due to decrease in price, the consumer surplus will increase. So the new consumer surplus is P2R2D. That is, there is increase of consumer surplus by P2R2R1P1 (P1R1D+P1R1R1P2). This increase in consumer surplus is due to decrease in price. If the price increases there will be decrease in consumer surplus.

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Analysis of Market Structure and Trends of Property Market

To define about market structure we will take a definition of French Economist, Cournot - “Market in economy is not the place where purchases and sales of a commodity take place.” Till now there are many ways of categorization of market structure but we will discuss here on some basic characters of market.

Number and Size of sellers:

Number of sellers decides the seller’s size. If there are large number of sellers, influence of one firm will be very small. If there is few numbers of sellers in market, every firm will have enough influence over price and supply. Market can be in dominant function if there are enough influence over price and supply.

Number of Size Distribution of buyers:

If there are many buyers, they will pay same price. If there is single buyer, he will be able to demand lower price.

Product Difference:

Product difference is known as the degree at which one product differs from the other in market. If there is differentiation of products, the decision of buyers will be based on price. To survive in market, every firm differentiates its product and tries to create imaginary difference.

Condition of Entry and Exist:

Entry in market is the biggest challenge for new product and firm. “Entry” is when a new firm is attracted by high profiles. If there are no substitutes available in the market, the firm can make decision without worrying about losing buyers.

Exit from industry happens when firms incur loss and the resources used can be used in producing other products. The firm will exit this industry and enter new industry, where the firm can use same resources. But if the resources have highly specialized uses and very few alternate uses then the exit will be difficult and costly decision.

So, this is the analysis of market on the base of market structure. We learnt about - how market survives among buyers and sellers, what are the trends of buyers and sellers in a market etc. Property market also runs on this concept. So, trends of property market are the very similar to this analysis.

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Revenue Analysis and Pricing Policies in Property Market

Revenue is a type of income which is received by the firm. It is related to Total Revenue, Average Revenue and Marginal Revenue.

Total Revenue (TR) – It is total income of a firm by selling a commodity at a price. We can indicate it as:

TR = PXQ

TR = Total Revenue
P = Price
Q = Number of Units

Average Revenue (AR) – We can find it by dividing the Total Revenue with the number of units sold. It can be indicated as:

AR = TR/Q

TR = Total Revenue
Q = Number of Units

Marginal Revenue (MR) – It is the addition to the Total Revenue as a result of increase in the sale of an addition unit by the firm.

Relation between TR and Price Elasticity or Demand:

If the price elasticity of demand for his product is relatively inelastic (Ep <1),>1), increase in price will decrease it TR.

We can express via a diagram

When Price increases and Ep is relatively elastic i.e.

On the other hand we can say it as – When price decreases and Ep is relatively elastic i.e. (Ep <1)

In the condition of When price increases and Ep is relatively inelastic i. e.

There is another aspect also, when price decreases and Ep is relatively inelastic i.e. (Ep <1).

At last, we can say prices once fixed can not be kept constant forever; it has to be revised according to the condition and the economic situation. The main objective of pricing policy is to maximize profit for the firm, stability is necessary to win the confidence of the customers and it should be able to capture enough market for the firm.

Penetration pricing is when the firm charges low price than what the economic analysis is the practice of charging a price more than indicated by the economic analysis while introducing a new product and when the competition is weak.

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Property Market is also Depended on Demand Analysis

There is a big difference between demand and want. Demand can’t be just want. The want, which are backed with purchasing power are called demand. Economics has a different definition about demand. The ability to pay is called demand in economics. Desire also can’t be a demand. For example – a beggar desires to purchase a car, can’t be demand in the word of economics.

Law of Demand:

There is a simple rule of demand, as price increases the demand decreases and as price decreases demand increases. But only price is not factor which affects the demand or supply.

Demand Schedule:

Quantity Demand

Exceptions of Demand Law:

Giffens Goods – Giffens goods is known by the name of Sir Robert Giffens. On the Giffens goods, law of demand doesn’t work as the price of those goods increases when there is increase in the quantity demanded and when the price decreases there is decrease in the quantity demanded. For example, people will prefer to use meat than potatoes when meat is cheaper than potatoes.

Ignorance effect – According to the law of demand, some people still buys those products which have quality while they are not cheaper.

Status symbol – In these categories, status symbol commodities take place like - jewellery, diamonds etc.

Speculation - Law of demand doesn’t work in the speculation of stock market.

There are some other factors also which affect the law of demand – income, price of related products, taste and preferences.

Income – It is the natural aspect to consume productive products. As income increases, demand increases.

Price of related products – For example – car and petrol are price of related products. As petrol prices decreases, car demand will increase.

Taste and preferences – taste and preferences are also related to each other. It depends on personal consumption and services.

At last, we conclude that all the market whether it is property, real estate or retail all are depended on each other.

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Way of Generating Real Estate Revenue

In the recession many companies are planning various ways to generate revenue from their business. Real Estate sector of India is also a big industry. In the real estate there are many big and small companies which are planning various ways to generate revenue from this industry.

I have analyzed a company revenue model which is from real estate sector. I am going to share the company revenue model. I have already share about the company in my previous post. Now, here I am going to share company’s revenue model.

The real estate company has call center revenue which has been explore in this way:

Product to promote:

Company has launched a mobile application for real estate adviser.

Adviser Model of the company:

Adviser model is a channel partner which working part time, full time with PropertySensex to promote 0% brokerage services to property buyers. The company proclaims, “To make it more users friendly we have introduced Buyer Seller Mobile Application, as a Product of mobile (Mobile users, market and growth pace).

Real Estate Revenue:

Company has sacrificed brokerage from buyers to promote adviser ship to make easy to beat competition and get easy business. In short they are free services for promoters. Company is sharing up to 20% for its brokerage form sellers. Adviser can sell all the Real Estate Projects under one roof without taking multiple paid registrations with better variety and margins then existing brokers.

He/she can generate leasing leads for across India and execute it with the help of our Service Network, Readymade offices, Property on wheel fleet across India, Builder, Broker Network, corporate tie-ups. Mobile is user-friendly mode and SMS is fast and cheap method for property business.

This is what the company thinks. Still it is not reality. I am showing only advertisement of the company revenue model. The company has to start 1st real estate chain in India in property business. There are many companies in the recession who claims this type of revenue models which are for common people but how effective they are, still undecided. Personally, I have still not seen this type of business model. Actually, these types of companies want to invest by common people in their business.

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India’s first Real Estate Retail Chain Company and Its Adviser Model & POW

PropertySensex announces to establish it as an India’s 1st real estate retail chain company. The company offers services in real estate sector as a single vendor in commercial, residential, farmhouses, office spaces and in flats properties. The company has expertise staffs for leasing commercial properties anywhere across India on 0% brokerage. It has given services as commercial space, office space, show room space, lease space and rent space for big corporate also like – TATA AIG Life Insurance, Max Life Insurance, Bharti AXA Life Insurance, Religare, Aviva, Subhiksha, Spencer Retail, Vishal Mega Mart, Wall mart and many more.

Let we justify adviser model of the company, how it works:

An adviser can be anywhere across India to deal the local requirement of property. Company assumes that an adviser will understand all the problems and requirements locally which will make easier to deal a property.

By the model the company can know closely the local problems and requirement through an adviser. Suppose the company gets an SMS by an adviser from NOIDA with the requirement of a commercial space, company call center will check the locality and send the requirement of local office. Local office of the company will contact with that person to show the commercial space of NOIDA with updated prices. The company has collections of all the offices and commercial spaces across India with updated prices. So, delay is not possible here.

This time the company needs a cab to show the property. So that, it have launched a car that called “property on wheel (POW)” that will be one of the resources of services.

A cab will reach to that person to property location that would be free of cost. It shows all the property according to the requirements of buyer by that cab on 0% brokerage. After the deal it will credit a 20% amount of commission to its adviser’s account because the company has software which will let it know, from whose adviser the lead had come.

This process will make easier to deal a property and increase trust to its services. It will create a huge number of clients and customers also in future. The company will work to join adviser across India. The adviser will create channels of sub adviser. Through this channel an adviser will earn 1000 for each pair.

The Property Company has made all these process easier to establish a call center. Any person either who is an adviser or customer has to call on a toll the company to join as an adviser.

Property on Wheel (POW)

Property on Wheel (POW) is another model of this company which will be in the support of advisers. The company announces that on each 100 adviser it will offer a cab to show the property on 0% brokerage model.

All the cab will be occupied with GPS (Global Positioning System) technologies to monitor the vehicles. It has tracking software to support the services. When a customer will call it to show a property, its backend call center will find nearest cab and dispatch to that for the customer.

It offers single calling number across India to make the process easy. This is because the company only wants to simplify its services. If it gets a call from a local town, it will trace that call’s locality and will submit to the local offices.

The service POW is only for buyers not for sellers. If sellers are interested in this service then it will be paid for them.

In every territory the company has managers and head that will operate all these services very effectively. Its car will run from 9AM to 6PM. It has offered an option to the adviser that if he has a car then the company will convert that as PropertySensex car. It is just because, it want to build a serious and dedicated team across India.

Property on Wheel will be a method of getting calls from buyers. It will advertise the company services, posters and phone numbers. It is not a single method of advertising but surly it will be one of the effective methods of advertising.

POW will be one of the effective media to advertise its business and will create trust among people who are interested in buying commercial properties or office spaces.

The company offers 0% brokerage for buyers because of to get maximum footfall, to make client feel free to approach it, to make loyal customers, to increase sales and to create trust in real estates market.

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Advisor Model to Start own Business in Real Estate Sector

All industries in all over world are facing crisis, today. Specially, Property and Real Estates industry are in losses. In the mid of crisis PropertySensex has launched India’s 1st real estates retail chain as adviser model.

On the adviser model the company announces that an adviser is a person who wants to do part time and full time job to earn extra money just giving advice about property. The opportunity will be provided by NetworkSensex which is a part of PropertySensex.

The program will run on unique concept which will provide 0% brokerage for buyer. An adviser has to just send an SMS to know us if a buyer interested to buy a property anywhere in India. In this process an advisor will earn 20% commission on the deal of a property.

To join as an adviser with us a person has to show his interest for the program. The program is on unique concept which will run on binary system.

Binary System to earn from being an adviser

What have to do as an Adviser?

An adviser has just to send us an SMS to know:

One of his friends are looking for a flat

A commercial company is looking for office space

One of his relatives are searching for a residential plot

A business company is looking for farmhouse

How an adviser will earn?

An adviser will refer us a buyer who is interested in buying. After having completed deal an adviser will earn 20% commission as against total 100%.

The company runs a system on a unique binary concept so, on the joining time an adviser has to refer minimum 50 contacts on the credit of Rs 20 each contact. An adviser can refer 100 people maximum on the credit. The form will be online which is mandatory to fill to activate you as an adviser. On the contact of adviser lists, our call center will call to those persons and explains to them about our adviser model to join. If a pair joins below you, you will be credited by default a lump sum of Rs 1000.

There are two processes to join as an adviser below you. You can convince a person directly or we will convince those people through calling to join below you.

To expose these programs we are running many campaigns like – Property on Wheel, T-Shirt of an Adviser model, Media campaigns, Through Online, Through SMS etc.

Through this adviser model a person can earn up to one lakh minimum and an extra ordinary person can earn up to 10 lakh.

Company wants to give quick return on your investment. On the joining time to become an adviser you have to just pay Rs 7020. In this model a person can join directly we to become an adviser or a person can join below an adviser also.

By this process the company just want to build a team across India (further in all over world) which can fulfill the requirement of a customer who wants to buy any type of property – commercial, farmhouse, residential, flat, offices etc.

As a company PropertySensex introduce the model to satisfy people need. The company has resources, infrastructures, men power and software to handle all the requirements very easily. If an adviser refers us to a buyer and we complete that deal very quickly then the buyer surely refer to another person to our adviser next time. This process will create a trust in market.

It is the simple model which understands the customer need because it is on 0% brokerage. Most of the people are unsecured due to brokerage charges, insecurity and lazy deal. To understand all these problems we have created the program to launch an adviser model.

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