Consumer and Producer Surplus

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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.