He bought a cell for $579. He doesn't like it anymore and posts it on instagram. He is willing to sell it if he gets a minimum of $194 for it. Someone is interested in the cell and is willing to pay a maximum of $504 for the cell. They negotiate and he sells her the cell at a price of $124. What is the total surplus created by him selling the cell to her? Assume no externalities. Include a negative sign if needed.

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Market Failure Analysis

To understand Market failure, we need to first understand welfare economics. An Italian economist, Vilfredo Pareto stated that allocation of resources in an efficient manner such that an economic change, which harms no one and makes someone better off, indicates an increase in social welfare. It is also called Pareto Optimality, where resources cannot further be reallocated without harming one. This does not apply to those economic changes, which harm some and benefit others. social welfare increases if the utility of any of its members' increases and none decrease in the economy.