When a market is competitive and functioning properly, economic theory predicts that the market equilibrium will be efficient. However, this may not always be the desired outcome. Market outcomes may be unequal or distorted by market failure. What effect will this solution have on consumer surplus, producer surplus, social surplus, and deadweight loss? Explain.
When a market is competitive and functioning properly, economic theory predicts that the
What effect will this solution have on
In the market where it is competitive and functioning properly, then it is the market equilibrium likely to make it efficient and in the market it is the market failure that is likely to in the economically be inefficient and it would benefit in least, one party in the without imposing costs. Consumer surplus in the gap in between the price that would consumers in the willing to pay and depending in the working in the market equilibrium price. Producer surplus is the gap that is between the price in between the producers and willingness to sell a product that is dependent on costs and as per the equilibrium price. Social surplus in the sum of the consumer surplus and producer surplus, and total surplus is the equilibrium quantity and pricing as per the quantity and price. Dead weight loss is the total surplus and it is the economy that is likely to produce in the inefficient quantity.
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