Market Efficiency

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. Producer surplus can also be thought as the wealth that trade creates for producers in a market. Producer surplus is measured in dollars. Graphically, producer surplus is the area below the equilibrium price and above the supply curve, from zero to the quantity traded.

Total Surplus

Maximized when markets are at equilibrium

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

Loss consumer surplus

Increase in price times the remaining units sold. Reduction in units traded times the increase in price divided by 2

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 consumer in such a way that their marginal benefit equals the marginal cost.

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 can also be thought of as the wealth that trade creates for consumers in a market. Consumer surplus is measured in dollars. Graphically consumer surplus is the area below the demand curve and above the equilibrium price, from zero to the quantity traded.

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. Also known as social welfare or total surplus. In graph its "total"

Deadweight loss

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

Marginal Benefit in allocation is shown as which curve

demand curve

Price Ceiling

prices never go above

Marginal cost in allocation is shown as which curve

supply curve