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Efficiency An allocation that maximizes overall economic well being is efficient Consumer Surplus Difference between willingness to pay and market price paid Producer Surplus Difference between willingness to accept and market price received Maximizing total surplus achieves efficiency Pareto Optimality When we cannot make anyone better off without making someone else worse of This is also efficient Evaluating the efficiency of markets Consumer surplus CS bh triangle below demand line at equilibrium and y axis PS bh triangle above supply line at equilibrium and y axis Evaluating Market Interventions What Intervention to override equilibrium Why Market price is socially embarrassing How Price ceilings and price floors TESTn
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