Chapter 4 - Consumer surplus, producer surplus, and economic efficiency. After completing this unit, you should be able to: Describe consumer surplus, producer surplus, economic surplus, and deadweight loss; illustrate and compute consumer surplus, producer surplus, and deadweight loss; describe how economic surplus can represent social welfare and economic efficiency. | Introduction to Economics: Social Issues and Economic Thinking Wendy A. Stock PowerPoint Prepared by Z. Pan Chapter 4 Consumer Surplus, Producer Surplus, and Economic Efficiency Copyright © 2013 John Wiley & Sons, Inc. / Photo Credit: ©Krystian Kaczmarski/iStockphoto 1 Describe consumer surplus, producer surplus, economic surplus, and deadweight loss Illustrate and compute consumer surplus, producer surplus, and deadweight loss Describe how economic surplus can represent social welfare and economic efficiency Assess the impact of market interventions on economic surplus and social welfare Identify groups who benefit and are hurt by market interventions Copyright © 2013 John Wiley & Sons, Inc. 2 After studying this chapter, you should be able to: 2 Consumer Surplus is the difference between what someone is willing to pay for a good or service and the price of the good or service. It is the net benefit buyers get from buying a good or service. Copyright © 2013 John Wiley & Sons, Inc. 3 CONSUMER SURPLUS 3 Copyright © 2013 John Wiley & Sons, Inc. 4 CONSUMER SURPLUS 4 Producer Surplus is the difference between the price at which a seller is willing and able to sell a given good and the actual price received for the good. It is the net benefit sellers get from selling a good or service. Copyright © 2013 John Wiley & Sons, Inc. 5 Producer surplus 5 Copyright © 2013 John Wiley & Sons, Inc. 6 Producer surplus 6 Economic Surplus is the sum of consumer surplus plus producer surplus. ES = CS + PS Copyright © 2013 John Wiley & Sons, Inc. 7 Economic Surplus 7 ES = CS + PS Copyright © 2013 John Wiley & Sons, Inc. 8 Economic Surplus 8 Copyright © 2013 John Wiley & Sons, Inc. 9 Disequilibrium and inefficiency Deadweight Loss: the loss in economic surplus that results from disequilibrium market outcomes. 9 Price Ceiling: An upper limit on the price of a good or service. A price ceiling sets the maximum amount that can be charged for a good or service. Examples: rent controls, . | Introduction to Economics: Social Issues and Economic Thinking Wendy A. Stock PowerPoint Prepared by Z. Pan Chapter 4 Consumer Surplus, Producer Surplus, and Economic Efficiency Copyright © 2013 John Wiley & Sons, Inc. / Photo Credit: ©Krystian Kaczmarski/iStockphoto 1 Describe consumer surplus, producer surplus, economic surplus, and deadweight loss Illustrate and compute consumer surplus, producer surplus, and deadweight loss Describe how economic surplus can represent social welfare and economic efficiency Assess the impact of market interventions on economic surplus and social welfare Identify groups who benefit and are hurt by market interventions Copyright © 2013 John Wiley & Sons, Inc. 2 After studying this chapter, you should be able to: 2 Consumer Surplus is the difference between what someone is willing to pay for a good or service and the price of the good or service. It is the net benefit buyers get from buying a good or service. Copyright © 2013 John Wiley & Sons, Inc. 3
