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The consumer's surplus is highest at the largest number of units for which, even for the last unit, the maximum willingness to pay is not below the market price. Consumer surplus can be used as a measurement of social welfare, shown by Robert Willig. [8] For a single price change, consumer surplus can provide an approximation of changes in welfare.
When a firm with absolute market power sets the monopoly price, the primary objective is to maximize its own profits by capturing consumer surplus and maximizing its own. A monopoly accomplishes this by setting a price above its marginal cost and producing at a quantity that meets market demand and corresponds to the set price
The total surplus of perfect competition market is the highest. And the total surplus of imperfect competition market is lower. In the monopoly market, if the monopoly firm can adopt first-level price discrimination, the consumer surplus is zero and the monopoly firm obtains all the benefits in the market. [15]
Surplus economics is the study of economics based upon the concept that economies operate on the basis of the production of a surplus over basic needs.
In economics, an excess supply, economic surplus [1] market surplus or briefly supply is a situation in which the quantity of a good or service supplied is more than the quantity demanded, [2] and the price is above the equilibrium level determined by supply and demand. That is, the quantity of the product that producers wish to sell exceeds ...
That is, any excess supply (market surplus or glut) would lead to price cuts, which decrease the quantity supplied (by reducing the incentive to produce and sell the product) and increase the quantity demanded (by offering consumers bargains), automatically abolishing the glut.
Deadweight loss is the reduction in social efficiency (producer and consumer surplus) from preventing trades for which benefits exceed costs. [2] Deadweight loss occurs with a tax because a higher price for consumers, and a lower price received by suppliers, reduces the quantity of the good sold. [2]
Consumer surplus need not exist, for example in monopolistic markets where the seller can price above the market clearing price. Alternatively, should fixed costs or economies of scale raise the marginal cost of adding more consumers higher than the marginal profit from selling more product, consumer surplus may be captured by the seller. This ...