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Surpluses, Transfers, Deadweight Loss and Blueberries

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  • Ellen Sewell

Abstract

The two Big Ideas around which an introductory microeconomics course should be constructed are efficiency and equity. Policy decisions generally affect both. This paper demonstrates that a simple analysis of government intervention in the blueberry market illustrates the concept of deadweight loss and the impact of market intervention on efficiency. The division of the deadweight loss, combined with transfers, provides the basis for weighing the impact on equity. A fuller understanding of these concepts demonstrates the need to balance equity and efficiency considerations in the public policy arena. These concepts and their application are well within the reach of introductory students.

Suggested Citation

  • Ellen Sewell, 2018. "Surpluses, Transfers, Deadweight Loss and Blueberries," Journal for Economic Educators, Middle Tennessee State University, Business and Economic Research Center, vol. 18(1), pages 1-7, Spring.
    • Handle: RePEc:mts:jrnlee:v:18:y:2018:i:1:p:1-7
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    File URL: http://capone.mtsu.edu/jee/2018/pp1-7MS617.pdf
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    References listed on IDEAS

    as
    1. Hausman, Jerry A, 1981. "Exact Consumer's Surplus and Deadweight Loss," American Economic Review, American Economic Association, vol. 71(4), pages 662-676, September.
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    More about this item

    Keywords

    efficiency; equity; deadweight loss; consumer surplus; producer surplus;
    All these keywords.

    JEL classification:

    • A22 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Undergraduate

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