Wednesday, December 11, 2013
Students March In The Streets, Demanding That Deadweight Loss Be Eliminated!!
I sometimes joke in class that students are marching in the streets and shouting "What do we want? Maximized Social Welfare! When do we want it? Now!"One of my students this semester, Charissa Fenton, made up this fake newspaper because of what I said. I think it is pretty funny.
Social welfare is the sum of consumer surplus and producer surplus. It is the total net gain we get from consuming and producing goods. It is one way to judge different policy outcomes. Deadweight loss is the loss of social welfare when we have monopoly instead of competition (or if we have negative externalities like pollution). There is no deadweight loss when P = MC. Here are some links