Measuring the Welfare Gain from Personal Computers

The welfare gain to consumers from the introduction of personal computers is estimated. A simple model of consumer demand is formulated that uses a slightly modi…ed version of standard preferences. The modi…cation permits marginal utility, and hence total utility, to be …nite when the consumption of computers is zero. This implies that the good won’t be consumed at a high enough price. It also bounds the consumer surplus derived from the product. The model is calibrated/estimated using standard national income and product account data. The welfare gain from the introduction of personal computers is 2 to 3% of consumption expenditure.