In economics, efficiency means it is impossible to improve the situation of one party without imposing a cost on another. Conversely, if a situation is inefficient, it becomes possible to benefit at least one party without imposing costs on others.

Scope and Methodology

The concept and meaning of efficiency can become even more specific than that, though. In the demand and supply model, efficiency means that the economy is getting as much benefit as possible from its scarce resources and all possible gains from trade have been achieved. In other words, the optimal amount of each good and service is being produced and consumed.

Write an essay no less than two pages in which you explain the importance of economic efficiency. Study and analyze the concept where you include answers to these questions:

What term would an economist use to describe what happens when a shopper gets a “good deal” on a product?
Explain why voluntary transactions improve social surplus.
Why would a free market never operate at a quantity greater than the equilibrium quantity? Hint: What would be required for a transaction to occur at that quantity?
What is consumer surplus? How is it illustrated on a demand and supply diagram?
What is producer surplus? How is it illustrated on a demand and supply diagram?
What is total surplus? How is it illustrated on a demand and supply diagram?
What is the relationship between total surplus and economic efficiency?
What is deadweight loss?
Objectives and Expectation:

You will introduce the concept of economic efficiency and address each of the above questions.
The assignment is to be a minimum of two pages long (title pages, bibliographies, etc.) and in APA/MLA format.
A good variety of objective, high quality, current sources need to be used.
Use graphs, tables, and charts to support your assertion.
Outstanding papers typically cite three or more references to support the discussion and to benchmark findings presented in the paper