Que: Ho w is welf ar e?


ma rket eq ui li bri um

re lat ed with

soci al

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 Supply Demand

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.


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