Economics - Market Efficiency

Welfare Economics

A branch of economics that focuses on measuring the welfare of market participants and how changes in the market change their well-being

Productive Efficiency

Producing output at the lowest possible average total cost of production; using the fewest resources possible to produce a good or service

Allocative Efficiency

Producing the goods and services that are most wanted by consumers in such a way that they marginal benefit equals their marginal costs

Consumer Surplus

The difference between the maximum price consumers are willing and able to pay for a good or service and the price they actually pay. Consumer surplus is also known as the wealth that trade creates for consumers in a market and is measured in dollars. It is the area below the demand curve and above the equilibrium price. The difference between the maximum price consumers are willing and able to pay for a good or service, and they price they actually pay.

Producer Surplus

The difference between the price producers receive for a good or service and the minimum price they are willing and able to accept. Also known as the wealth that trade creates for producers in a marked measured in dollars. It is the area below the equilibrium price and above the supply curve. The difference between the price producers receive for a good or service and the minimum price they are willing and able to accept.

Economic Surplus

The sum of consumer and producer surplus; a measure of the total welfare, or wealth, that trade creates for consumers and producers in a market. AKA social welfare

Deadweight loss

The value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium