Consumer and Producer Surplus
Read this article and attempt several practical problems related to consumer and producer surplus by answering the "Try It" quiz questions. Check your answers after you're done.
5. WATCH IT
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.