Answer to Question #136415 in Microeconomics for Jafri

Question

What is economic welfare ?

Answer 1

Economic Surplus

Economic welfare generally refers to the economic well-being of an economic entity, such as a country. It is usually expressed as the sum of consumer surplus and producer surplus realized within an economy. Community surplus is the term used to refer to the two types of economic surpluses. In economics, community surplus and economic welfare can be used interchangeably. Consumer surplus occurs in instances where the price of goods and services a consumer would be willing to pay in terms of their expected private benefit is higher than what they end up paying. On the other hand, producer surplus exists when the price a producer would be prepared to supply at is relatively lower than the actual market price. Therefore, economic welfare is measured by the sum of consumer and producer surpluses; and it is majorly used to determine changes in market conditions, such as changes in price and quantity demand.