When changes occur in a market—whether they are shifts in demand, shifts in supply, or government policies that interfere in the market's workings—they affect the welfare that market participants gain by virtue of being in the market. We can understand these changes by analyzing producer and consumer surplus, and this is the focus of this lecture.
Taxicab medallions are distributed and restricted by the government, and have an impact on social welfare. Image courtesy of Vilseskogen on Flickr.
Keywords: Welfare economics; consumer surplus; producer surplus; social welfare; dead weight loss.
Read the recitation notes, which cover new content that adds to and supplements the material covered in lecture.
Before watching the lecture video, read the course textbook for an introduction to the material covered in this session:
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- Market Consumer Surplus (00:12:46)
Market Consumer Surplus
- Producer Surplus (00:05:07)
- Social Welfare and Dead Weight Loss (00:06:24)
Social Welfare and Dead Weight Loss
- Impact of Government Interference on Social Welfare (00:05:01)
Impact of Government Interference on Social Welfare
- Occupational Restrictions: Taxicab Medallions (00:14:27)
Occupational Restrictions: Taxicab Medallions
- Occupational Restrictions: Medical Residency (00:03:17)
Occupational Restrictions: Medical Residency
This concept quiz covers key vocabulary terms and also tests your intuitive understanding of the material covered in this session. Complete this quiz before moving on to the next session to make sure you understand the concepts required to solve the mathematical and graphical problems that are the basis of this course.
These optional resources are provided for students that wish to explore this topic more fully.
See the [Perloff] companion website for an overview of the main topics covered in the chapter, as well as quizzes, applications, and other related resources.