3.23, producer surplus is the area labeled G—that is, the area between the market price and the segment of the

supply curve below the equilibrium.

The sum of consumer surplus and producer surplus is social surplus, also referred to as economic surplus or

total surplus. In Figure 3.23 we show social surplus as the area F + G. Social surplus is larger at equilibrium

quantity and price than it would be at any other quantity. This demonstrates the economic efficiency of the
market equilibrium. In addition, at the efficient level of output, it is impossible to produce greater consumer

surplus without reducing producer surplus, and it is impossible to produce greater producer surplus without

reducing consumer surplus.

Inefficiency of Price Floors and Price Ceilings

The imposition of a price floor or a price ceiling will prevent a market from adjusting to its equilibrium price
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