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

2. Consumer Surplus 24681012 4 8 $20 16 Price Quantity

3. 24681012 4 8 $20 16 Price Quantity Producer Surplus

4. Quantity Price 100200300400500 1.8 1.9 2.0 2.1 2.2 2.3 2.4 2.5 Consumer Surplus and Producer Surplus Efficient markets An equilibrium price and quantity that maximizes total surplus.

5. 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

6. 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.

7. Quantity Price 100200300400500 1.8 1.9 2.0 2.1 2.2 2.3 2.4 2.5 Low Price Ceilings Deadweight Loss

8. Quantity Price 100200300400500 1.8 1.9 2.0 2.1 2.2 2.3 2.4 2.5 High Price Floors

9. Excise Tax Quantity Price 100200300400500 1.8 1.9 2.0 2.1 2.2 2.3 2.4 2.5