Efficiency and equity ask different questions
A larger total does not dictate a preferred distribution. An allocation is efficient when no available rearrangement can create additional net gains under the model. Equity concerns fairness. A policy can redistribute surplus while also changing total surplus. Economists can estimate the efficiency effect, but choosing how to weigh gains and losses requires normative judgment. […]
The competitive quantity maximizes total surplus under key assumptions
Include units whose marginal benefit is at least marginal cost. When demand equals marginal social benefit and supply equals marginal social cost, every unit before equilibrium has benefit greater than cost. Every unit beyond equilibrium costs more than buyers value it. The equilibrium quantity therefore maximizes consumer plus producer surplus. The phrase “under key assumptions” […]
