Consumer Surplus

1
Consumer Surplus
Producer Surplus
Efficiency Inefficiency
Government intervention
Imperfect markets
2
Consumer Surplus
3
Producer Surplus
4
Consumer Surplus and Producer Surplus
Efficient markets
An equilibrium price and quantity that maximizes
total surplus.
5
Inefficient Markets
Not all markets are efficient.
Inefficient if someone can be made better off
without making someone else worse off.

• plums cannot be distinguished from lemons
• plum-sellers and plum-buyers are driven from the
  market

6
Inefficient Markets
Not all markets are efficient.

• Suppliers willing to sell generic Claritin to
  low-income buyers are prevented from doing so.

• Citizens willing to pay the plant to install
  scrubbers have no system to do so.

7
Low Price Ceilings
Deadweight Loss
8
High Price Floors
9
Excise Tax