ABSTRACT
This chapter explores the economic efficiency and equity. One way to think about the meaning of economic efficiency is with a supply and demand diagram for a market good. The size of the consumers' surplus and the producers' surplus are also different for a nonmarket good because price isn't used as a rationing device. One key assumption of consumer choice theory is that the consumer is able to compare different bundles or combinations of commodities in terms of their ability to provide utility. The consumer wants to maximize utility from many commodities, including cassettes, subject to that consumer's limited income and the price of cassettes. Economic efficiency is espoused by economists as a criterion for collective choice because it stresses the net economic value of market and nonmarket goods and services—and because few others espouse it.
