These notes are for additional information only and reflect the absolute minimum of what you need to know. The information covered on the quizzes, tests and the final exam will go beyond of what is being covered here. If you have any questions please don't hesitate to contact me. Market Consumer Surplus is equal to the sum of individual consumer surpluses. Market Producer Surplus is equal to the sum of the individual producer surpluses.
Market equilibrium is efficient because it generates the highest possible total market value.
Even though each individual consumer or producer is not concerned with generating the highest possible total market value, but, rather, only takes into consideration her or his own interest, the result is quite remarkable. If the government establishes the maximum price that can be charged in the market, it could distort the market and prevent certain mutually beneficial transactions from hapenning. If the government establishes the minimum price that can be charged in the market, it could distort the market and prevent certain mutually beneficial transactions from hapenning. Shifts in supply, demand 2. Definitions of Consumer Surplus, Producer Surplus, total market value 3.