“Optimal Purchase-Order Path and Consumer Surplus”—Abstract

I define optimal purchase-order path as the sequence of incremental sub-bundles in a discrete (as opposed to continuous) consumption space that a consumer would purchase according to their preferences starting from nothing and ending up at the best bundle afforded by their budget and goods prices. This concept provides a basis for assessing the change in consumer surplus between any two budget-price situations that the consumer may face thereby getting around the path-dependence problem of the standard consumer surplus literature. It will hopefully also enable a clearer calculation of consumer surplus in the context of multiple price changes that is an exact measure of welfare change with the potential for important practical application in the realm of cost-benefit analysis.

Key Words: ….

JEL Classification Numbers: ….