1. The Geometry of Economics: Welfare Analysis

2. Market Equilibrium Price Supply Consumer Surplus Pe Producer Surplus
Demand Qe
Quantity
Consumer surplus is the difference between what consumers would willingly pay and the equilibrium price
Producer surplus is the difference between what producers would willingly charge and the equilibrium price. Producer surplus is economic rent

3. Market Equilibrium Price Supply Consumer Surplus Pe Producer Surplus
Demand Qe
Quantity
Consumer surplus is the difference between what consumers would willingly pay and the equlibrium price
Producer surplus is the difference between what producers would willingly charge and the equlibrium price. Producer surplus is economic rent

4. Market Equilibrium Price Supply Pe Total Revenue Demand Qe Quantity
Pe X Qe = Total Revenue

5. Market Equilibrium Supply + Tax Price Supply  Pt Pe Pp Total Revenue
Tax Revenue Pp
Total Revenue
Business Revenue
Demand Qt Qe
Quantity
Assume a per-unit tax is imposed in the market

6. Market Equilibrium Supply + Tax Price Supply  Pt Pe Pp Demand Qt Qe
Consumer Surplus Pt
Deadweight Loss Pe
Tax Revenue Pp
Producer
Surplus
Business Revenue
Demand Qt Qe
Quantity
Assume a per-unit tax is imposed in the market

7. Market Equilibrium Supply + Tax Price Supply  Pt Pe Pp Demand Qt Qe
Consumer Surplus Pt
Deadweight Loss Pe
Tax Revenue Pp
Producer
Surplus
Demand Qt Qe
Quantity
Deadweight loss is the loss of producer and consumer surplus that exists when a price other than the market equilirium price prevails in the market.
Assume a per-unit tax is imposed in the market