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Que: Ho w is ma rket eq ui li bri um re lat ed with soci al

welf ar e?

The way how market equilibrium is related with social welfare is discussed below:

●In the economics, the equilibrium is the condition where supply equals demand.
That means excess supply in the market is zero. So, there is no possibility for
produced things to be wasted.

●Sometimes consumers offer too little for the good and their demand is not
fulfilled. But, market equilibrium ensures that those who are willing to pay greater
than or equal to the market price will have their demand fulfilled. So, in this case,
the consumers are satisfied and have saved their money also. This is called
consumers surplus.

Price (P) Market Equilibrium

Consumer surplus


Producer surplus
Quantity (Q)

●Sometimes producers willing to produce when the price is very low in the
market, some producers willing to produce when the price becomes little bit
higher. But all of them will receive equilibrium price for their production. It means
the producers are benefited and enjoying some extra satisfaction. This satisfaction
is related with social welfare. This is called producers surplus.