Welfare analysis
Economic efficiency and Social Welfare
Economic efficiency and Social Welfare
- Some details on what economic efficiency means here
Consumer and Producer surplus
Consumer and Producer surplus
- Consumer surplus: sum of (marginal utility - unit price)
- Producer surplus: sum of (marginal revenues - marginal costs) = total revenue - variable costs
- Producer surplus ≠Profit.
Profits = total revenue - total costs = Producer surplus - fixed costs
The consumer and producer surplus depends on the market structure: see the case of Ex1 PS3