Be able to apply these concepts when discussing economic efficiency and welfare issues, such as price discrimination and the dead-weight losses associated with monopoly
Consumer and producer surplus measure the total welfare a market creates. You can use them to show how monopoly and price discrimination change who gains, who loses, and how much welfare is permanently destroyed.
Formula
Deadweight loss = ½ × (Pm − Pc) × (Qc − Qm)
Real World
When a pharmaceutical monopolist like Pfizer prices above marginal cost for a patented drug, consumers who would have bought at a competitive price are priced out — creating a deadweight welfare loss.
Exam Focus
Draw and label a diagram showing CS, PS, and the DWL triangle — a correctly shaded diagram alone can secure several marks.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
How well did you know this?