How can the overall economic welfare of both producers and consumers be measured?

The overall economic welfare of both producers and consumers can be effectively measured by determining consumer and producer surplus combined. Consumer surplus represents the difference between what consumers are willing to pay for a good or service and what they actually pay, reflecting the benefit they receive from purchasing. Producer surplus, on the other hand, is the difference between the amount producers are willing to accept for a good or service and the amount they actually receive, indicating the benefit to producers from selling.

When both surpluses are combined, they provide a comprehensive view of the economic welfare within a market, illustrating how well the resources are allocated and the extent to which both consumers and producers are benefiting from market transactions. High levels of combined surplus indicate an efficient market where the interests of both parties are being maximized.

Calculating total market demand, evaluating price elasticity of demand, or assessing government intervention levels do not provide a complete or direct measurement of welfare. Market demand focuses on quantity and price without necessarily reflecting welfare, price elasticity assesses responsiveness to price changes rather than direct welfare impacts, and government intervention can have varied effects on market outcomes, making it a less direct measure of overall welfare. Therefore, the combined approach of consumer and producer surplus is the most effective method for assessing overall economic welfare.