New study reveals how consumer choices impact social welfare and profits.
The article explores how consumer surplus changes when there are limits on what people can buy and when the importance given to consumers and firms is different. They find that when there are restrictions on what people can buy, it can affect how much businesses produce. Also, when the importance given to consumers and firms is not the same, overall welfare may not always increase, and profits for businesses could even decrease. The researchers provide a way to calculate how much welfare is lost due to these factors in certain situations.