and the market equilibrium price. Producer surplus is the gap between the price for which producers are

willing to sell a product, based on their costs, and the market equilibrium price. Social surplus is the sum of

consumer surplus and producer surplus. Total surplus is larger at the equilibrium quantity and price than it

will be at any other quantity and price. Deadweight loss is loss in total surplus that occurs when the economy

produces at an inefficient quantity.

Self-Check Questions

1. Review Figure 3.4. Suppose the price of gasoline is $1.60 per gallon. Is the quantity demanded higher or

lower than at the equilibrium price of $1.40 per gallon? What about the quantity supplied? Is there a

shortage or a surplus in the market? If so, how much?

2. Why do economists use the ceteris paribusassumption?

3. In an analysis of the market for paint, an economist discovers the facts listed below. State whether each of
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