Consumer surplus is the delta between what consumers expect to pay or are willing to pay for an item and what they actually have to pay given market dynamics. A good example of where we are generating a lot of consumer surplus is technology. I would be happy to pay for my email but I can get it for free from Gmail. A 49″ smart TV sells for about £250 on Amazon. A Samsung Chromebook is £200 on Amazon.
I like to think of all of this “found money” that consumers are getting from technology as the dividend we are getting from the technology revolution. It is also true that technology takes jobs out of the market, and adds them too, and that it may be a zero sum game or worse.
But the truth is many things have gotten a LOT less expensive over the last twenty years and that has made managing the household budget a fair bit easier.
What you see from the chart is that wages have increased about 70% over the last twenty years and many things, including housing, food, clothing, and most dramatically technology, have increased less, or have actually gone down in price, creating room/surplus in the household budget.
But not everything has gone down. Health care and education, most notably have increased dramatically.
Our aim at Graffiti is to find extraordinary companies that are going to improve the financials of households delivering the same or better service for much less money.