the form of special programs, such as welfare programs, for low-income people Whatever distribution society chooses, an efficient allocation of resources is still preferred to an inefficient one Because an efficient allocation maximizes net benefits, the gain in net benefits could be distributed in a way that leaves all people better off than they would be at any inefficient allocation If an efficient allocation of resources seems unfair, it must be because the distribution of income is unfair KEY TAKEAWAYS In a competitive system in which the interaction of demand and supply determine prices, the corresponding demand and supply curves can be considered marginal benefit and marginal cost curves, respectively An efficient allocation of resources is one that maximizes the net benefit of each activity We expect it to be achieved in markets that satisfy the efficiency condition, which requires a competitive market and well-defined, transferable property rights Consumer surplus is the amount by which the total benefit to consumers from some activity exceeds their total expenditures for it Producer surplus is the amount by which the total revenues of producers exceed their total costs An inequitable allocation of resources implies that the distribution of income and wealth is inequitable Judgments about equity are normative judgments TRY IT! Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 324