How is consumer surplus defined?

Consumer surplus is identified as the difference between what consumers are willing to pay for a good or service and what they actually pay. This concept captures the benefit or utility that consumers receive from purchasing a product at a lower price than the maximum amount they would be willing to pay.

For example, if a consumer is willing to pay $10 for a sandwich but buys it for $7, the consumer surplus is $3. This surplus reflects the extra value or happiness that consumers derive from the transaction, highlighting the efficiency of the market in providing goods at prices below consumer expectations.

The other choices do not correctly define consumer surplus. The first option pertains to budgeting, which is unrelated to the concept's essence of valuation versus price. The third option suggests a loss, which contradicts the positive nature of surplus as a benefit. The fourth option simply totals spending without considering the comparison between willingness to pay and actual expenditure, which is crucial to understanding consumer surplus.