Why Some Appraisers Confuse Consumer Surplus with Property Value in Hotel Appraisals

Hans Detlefsen | January 3, 2017

By Hans Detlefsen Introduction Consumer surplus is a valuable concept that can help appraisers understand what is and is not property value in hotels. Readers can think of consumer surplus as the difference between what a buyer is willing to pay for an item and that item's market price. If you are willing to pay $5.00 for a gallon of milk, but the local supermarket price is only $3.49, then you can enjoy a consumer surplus of $1.51 by purchasing the gallon of milk. In this example, the market price, or market value, of a gallon of milk is $3.49, even though at least one buyer would be willing to pay more. The market value of an item can...