Medibank is an Australian government owned private health insurance company and on the year 2014, the Australian Government announced plans to privatize Medibank. If the government plans to maximize welfare in their firms and also privatized the firms, then there will always be a huge impact on the prices being charged in the economy as well. An economy works well only if it can manage the increasing profit as well knows how to handle the increasing growth in the economy. Therefore, management of higher dividends for shareholders, makes the firm less vulnerable to takeover, higher profit enables higher salaries for workers and profit used to finance research and development (Lorenz, 2014).
Consumer surplus takes place when there is a major difference between the consumer’s willingness to pay for a commodity and the actual price which can be paid by the consumers. It also helps in measuring the customer satisfaction which can be showcased in the sense that consumers feel like they are getting a good deal on the goods and services as they buy and also consumer surplus is an economic measure of satisfaction. For a firm which works towards welfare maximization, it is also known as perfect competition where the consumer surplus is lower and good standards for the same are accepted (Lorenz, 2014).
Producer surplus is the difference between the revenue which sellers take in from the sale of good and the minimum amount could also be accepted in order to produce that particular product. Producer surplus is basically the welfare which sellers get from selling a particular commodity. It is the benefit that the producer receives for selling the goods in the market. Total surplus is basically a summation of consumer surplus and producer surplus. Total surplus comes in handy when the consumer is willing to pay the price but the economic costs are high enough to make negative costs. The below figure shows the total surplus (Thismatter, 2014)