An exchange between a buyer and seller occurs usually when the exchange creates both a consumer surplus and a supplier surplus. Market efficiency occurs when consumer and supplier surplus are maximized. However, in exchanges between buyers and sellers, should society be only concerned with market efficiency?

1. Describe a personal experience of when you purchased a product or service whereby you feel you maximized surplus as a consumer and b) why this qualifies as being an example of consumer surplus.

Answer as follows:

1a) My personal experience is as follows: ......

1b) This qualifies as an example of consumer surplus because .....

2. The lesson notes describe both positive and negative externalities. An interesting situation occurs when there is a positive externality. This is interesting because economists state this is a result of market inefficiency or failure.

a) Combine the lesson notes with some of your own research and your own experiences to describe when you were part of a transaction that resulted in a positive externality, b) State why the transaction resulted in a positive externality, and c) State why from an economist's viewpoint this would be considered market inefficiency.

*** You cannot use the example of a violinist or musician providing music free of charge in a restaurant or other setting.***

Answer must be outlined as:

a) My example of a positive externality experience is as follows: .....

b) This is an example of a positive externality because ....

c) Economists would view this as market inefficiency because .,,