Chapter 7: Consumers, Producers, and the Efficiency of Markets

This chapter is all about welfare economics, that is the study of how the allocation of resources affects economic well-being. We understand from previous chapters that the market tends to head towards equilibrium because of the laws of supply and demand, but now we understand better WHY that equilibrium is best for both the buyer and the seller. There's a whole lot about willingness to pay and consumer surplus, but the really interesting part is the use of the Beatles as example people. Coincidentally, listed in order of greatness. Surplus seems like a relatively simple concept as well, because more buyers will enter the market as the price goes down, and buyers whose willingness to pay was higher gain more individual consumer surplus. With the exception of heroin addicts, policymakers generally take into account buyer behavior when making policy decisions. Producer surplus works the same way as buyer surplus, except in reverse. Both of these concepts together combine to form "the Benevolent Social Planner". The hypothetical benevolent social planner is in charge of analyzing the total surplus of the market, which is the value of the goods to the buyers - the cost to the sellers. Overall, I couldn't really get into this chapter as I found it repeating some of the same concepts over and over again. I would rate this a 2/3 in terms of difficulty.