ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The total producer and economic surplus are used to indicate the amount of economic efficiency in a market. The economic efficiency is maximized at the point where the total producer and consumer surplus are maximized. This happens at the equilibrium market price and quantity.

Detailed explanation-2: -You can measure efficiency by dividing total output by total input. There are a number of different types of efficiency, including economic efficiency, market efficiency, and operational efficiency. Efficiency is an important attribute because all inputs are scarce.

Detailed explanation-3: -Therefore, the total surplus in a market is the difference between the value to the consumers or buyers and the cost to the sellers or the minimum supply price or the cost of production to the sellers. If the positive value of the total surplus is increased then we can say that the allocation is efficient.

Detailed explanation-4: -The higher the total surplus, the more efficient the economy is. Total surplus and thus economic efficiency are maximized at the free market equilibrium quantity. The total surplus would be lower at any quantity other than equilibrium, and so economic efficiency would be worse.

Detailed explanation-5: -The total surplus in a market is a measure of the total wellbeing of all participants in a market. It is the sum of consumer surplus and producer surplus. Consumer surplus is the difference between willingness to pay for a good and the price that consumers actually pay for it.