Session Overview
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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.
Session Activities
Readings
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:
- [R&T] Chapter 6, "Markets, Maximizers, and Efficiency."
- [Perloff] Chapter 9, "Welfare Economics." (optional)
Lecture Videos
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View by Chapter
- Market Consumer Surplus (0:12:46)
- Producer Surplus (0:05:07)
- Social Welfare and Dead Weight Loss (0:06:24)
- Impact of Government Interference on Social Welfare (0:05:01)
- Occupational Restrictions: Taxicab Medallions (0:14:27)
- Occupational Restrictions: Medical Residency (0:03:17)
Resources
Check Yourself
Concept Quiz
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.
Further Study
These optional resources are provided for students that wish to explore this topic more fully.
Textbook Study Materials
See the course website for Econ 302, Intermediate Economics taught at Penn State in 2011.