ECON1101 Chapter Notes - Chapter 7: Pareto Efficiency, Price Ceiling, Sony Max
12 Nov 2020
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Market equilibrium and efficiency: market equilibrium occurs when demand intersects to supply. This is because at any other price, quantity exchanged will be lower. Efficiency is not always desirable for everyone on an individual basis. This is because efficiency does not always yield certain outcomes such an equality. Pricing controls reduce efficiency as it creates a situation where transactions that would benefit people without harming others are forgone, refer to the price ceiling example in topic 3. In response to inadequate nutrition for low income families: at equilibrium, . 40, many people cannot afford milk to meet their children"s nutritional requirement. 3000l sold, consumer surplus = /day, producer surplus = 1000l sold, consumer surplus = , producer surplus = , total. Loss of - conservative estimate (assumes buyers have the highest reservation prices) Introduction of subsidy to consumers: q = 6000, consumer surplus = , total economic surplus = but.
