Pareto Efficiency vs. Deadweight Loss

A. Consider the social surplus in the competitive market equilibrium.

Draw a graph of a hypothetical supply and demand in a competitive market where the equilibrium quantity is 50 units and the equilibrium price is $10. (2 points)

Shade and label the consumer surplus in your graph. (1 points)

Shade and label the producer surplus in your graph. (1 points)

B. Now consider the consequence of imposing a price floor in the market.

Create another copy of your original graph of supply and demand where the equilibrium quantity is 50 units at equilibrium price $10. But this time, set a price floor at $12. (2 points)

Shade and label the consumer surplus. (1 point)

Shade and label the producer surplus. (1 point)

Shade and label the deadweight loss. (1 point)