Principles of Microeconomics / Unit 2 MIC 0136 worked example, 60 to 90 seconds
Who Gains and Who Loses from a Control
The idea
To account for a control, split each side into those still trading and those shut out. Under a ceiling, buyers who still get the good gain the price cut; buyers who no longer get it lose their surplus; sellers lose the price cut on every unit sold, and sellers of the lost units lose their surplus too. Under a floor the roles reverse. Then total it: the transfer is a wash for society, the two lost-surplus triangles are the deadweight loss, and the gaining side gains less than the losing side loses by exactly that amount.
In practice
Worked example, the medicine ceiling again. The fifteen thousand buyers still getting doses gain twenty dollars each, three hundred thousand dollars, transferred from sellers. Sellers lose that plus their surplus on the five thousand doses no longer sold. Buyers who wanted those doses lose their surplus on them. The two lost surpluses add to video one thirty-four's hundred-thousand-dollar deadweight loss. Buyers as a group gain three hundred thousand minus their share of the loss; sellers lose three hundred thousand plus theirs.
Where people slip
Do not stop at the transfer. A control looks like a pure win for one side only when the shut-out traders are left out, and they are the ones the diagram is drawn to find. Whether the transfer is worth the loss is a normative question; the size of each is positive.
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