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A-Level Economics · Consumer & producer surplus diagram question

Which area shows TOTAL economic welfare (society's surplus) at equilibrium?

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The diagram

The answer

The triangle A O E. CS + PS together — the whole wedge AOE between D and S. This is what welfare loss 'shaves off'. Society's gain = consumer surplus AND producer surplus — the full triangle AOE between the two curves. Welfare-loss questions are about who shaves bits off this.

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This is one of 3 questions on the consumer & producer surplus diagram — every corner lettered, every wrong answer diagnosed.

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