Home> Schools> University of Massachusetts Amherst> Economics (ECON) > ECON 103> Notes
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Efficiency- An allocation that maximizes overall economic well-being is efficientConsumer Surplus- Difference between willingness to pay and market price paidProducer Surplus- Difference between willingness to accept and market price receivedMaximizing total surplus achieves efficiencyPareto Optimality- When we cannot make anyone better off without making someone else worse of- This is also efficientEvaluating the efficiency of markets Consumer surplusCS=½ bh (triangle below demand line at equilibrium and y-axis)PS=½ bh (triangle above supply line at equilibrium and y-axis)Evaluating Market InterventionsWhat? Intervention to override equilibriumWhy? Market price is socially embarrassingHow? Price ceilings and price

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