1. Chapter Six:
Welfare Analysis

2. Consumer Surplus

3. Figure 6.1: Demand Curve for Cups of Coffee
This figure shows the same demand curve for coffee we presented in Chapter 3.

4. Figure 6.2: Detailed Demand Curve for Coffee
By “zooming in” on the demand curve we can associate marginal price changes with marginal changes in the quantity demanded.

5. Figure 6.3: Consumer Surplus and a Demand Curve
Consumer surplus is the difference between price and someone’s maximum willingness to pay (i.e., the demand curve).

6. Figure 6.4: Market Consumer Surplus
Market consumer surplus is the area below the demand curve but above the price.

7. Producer Surplus

8. Figure 6.5: Supply Curve for Cups of Coffee
This figure shows the same supply curve for coffee we presented in Chapter 3.

9. Figure 6.6: Detailed Supply Curve for Coffee
By zooming in on the supply curve we can associate marginal price changes with marginal changes in the quantity supplied.

10. Figure 6.7: Producer Surplus and a Supply Curve
Producer surplus is the difference between price and the production cost (i.e., the supply curve).

11. Figure 6.8: Market Producer Surplus
Market producer surplus is the area above the supply curve but below the price.

12. Social Efficiency

13. Figure 6.9: Social Welfare at market Equilibrium
Net welfare benefits are the sum of consumer and producer surplus.

14. Figure 6.10: A Price Ceiling
A price ceiling sets a maximum allowable price, which creates a deadweight loss.

15. Figure 6.11: A Price Floor
A price floor sets a minimum allowable price, which creates a deadweight loss.