Consumer and Producer Surplus


In this video, you'll consider the holiday market for Santa hats. The market is efficient and both consumer and producer surplus are maximized at the equilibrium point of $5.

If the government establishes a price ceiling, a shortage results, which also causes the producer surplus to shrink, and results in inefficiency called deadweight loss.

If government implements a price floor, there is a surplus in the market, the consumer surplus shrinks, and inefficiency produces deadweight loss.