1. Economists would describe efficiency, in respect to markets, as maximizing both consumer and producer surplus. In an efficient market, where supply and demand meet at equilibrium price, total surplus is split evenly among producers and consumers.
2. The most difficult concept of this chapter is understanding the significance of total surplus.There are so many aspects to consider simultaneously. For instance, total surplus will always be the same right? Whether it is shared equally - 50/50, or if it's 40/60, 80/20, or even one side has all the surplus and the other has none. Since we're all part of both supply and demand in one way or the other, any type of surplus will be shared by the economy as a whole. I also have a problem making all the assumptions we are asked to make to believe in the the theory of market efficiency and I think equality cannot be left out of the efficiency theory all together. Just because it looks nice and neat on a graph, doesn't mean it applies in the real world. Does it?
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