Market Efficiency

Producer Surplus Definition

Producer Surplus Definition

The producer surplus is the difference between what the producer sells its goods for and the minimum price it would be willing to sell for. In other words, because the producer is selling at a higher price than they would accept, a ‘producer surplus’ is created.

Allocative Efficiency Graph

What is Allocative Efficiency

Allocative Efficiency occurs when consumers pay exactly the marginal cost of production. In other words, businesses stop making the product when there are no further profits to be made

Deadweight Loss Definition

Deadweight Loss Definition

A deadweight loss is a loss in economic efficiency as a result of disequilibrium of supply and demand. In other words, goods and services are either being under or oversupplied to the market – leading to an economic loss to the nation.

Consumer Surplus Definition

Consumer Surplus Definition and Example

A consumer surplus is defined as the gap between what consumers are able and willing to pay, and the actual price paid. In other words, you may be willing to spend $5 on a Dunkin’ Donut, but you only pay $3 for it.