Continuing with our numerical example, consumer surplus under allocative efficiency is 90, with output reduced to 10 remaining surplus is only 15, a loss of over 80% of the surplus enjoyed by consumers when output is allocatively efficient.

    The allocatively efficient level of output gives producers a surplus of 100, while under the reduced output producer's surplus increases to 125. So, while total surplus is reduced, and consumer surplus falls tremendously, producer's surplus rises. Even if we tax producers and return the tax revenue to consumers, there simply isn't enough surplus in the system to make both producers and consumers as well off as in an allocatively efficient market.

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