3.1 – AS 91399
Demonstrate understanding of the efficiency of market equilibrium.

External – 4 Credits.
Demonstrate understanding involves:

• providing an explanation of:
• market equilibrium and/or changes in market equilibrium
• efficiency in the market
• using an economic model(s) to illustrate concepts relating to the efficiency of market equilibrium.

Demonstrate in-depth understanding involves:

• providing a detailed explanation of:
• market equilibrium and/or changes in market equilibrium
• impact of changes in markets on efficiency in the market
• using an economic model(s) to illustrate complex concepts and/or support detailed explanations relating to the efficiency of market equilibrium.

Demonstrate comprehensive understanding involves:

• analysing the impact of a change in a market on efficiency by comparing and/or contrasting the different impacts on participants (ie consumer, producer and, where appropriate, government) in that market
• integrating an economic model(s) into explanations relating to the efficiency of market equilibrium that compare and/or contrast the different impacts.

Efficiency refers to allocative efficiency of market equilibrium which occurs when the sum of consumer and producer surpluses are maximised (so ‘total surpluses’ are maximised).  This includes recognising that deadweight loss indicates a market is allocatively inefficient.

Market equilibrium includes:

• market equilibrium as a result of the operation of market forces; or
• impact of changes on markets, including the impact on consumer surplus, producer surplus, and total surpluses.  This typically includes changes in international trade markets and/or changes imposed on market equilibrium by government.
• Elasticity may be included as part of the analysis.