Consumer Surplus 6 Consumer and Producer Surplus Producer Surplus Efficiency & Inefficiency Imperfect markets Government intervention

Consumer Surplus $20 16 Price Quantity

$20 16 Price Quantity Producer Surplus

Quantity Price Consumer Surplus and Producer Surplus Efficient markets An equilibrium price and quantity that maximizes total surplus.

Inefficient Markets Inefficient: if someone can be made better off without making someone else worse off. Not all markets are efficient.  plums cannot be distinguished from lemons  plum-sellers and plum- buyers are driven from the market

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.

Quantity Price Low Price Ceilings Deadweight Loss

Quantity Price High Price Floors

Excise Tax Quantity Price