In a perfectly competitive market, how is allocative efficiency achieved, and what is the impact on consumer surplus and deadweight loss when the price is set above the equilibrium price?

In a perfectly competitive market, allocative efficiency is achieved when resources are distributed in a way that maximizes total welfare, meaning goods are produced at a level where the price equals the marginal cost of production. This balance ensures that consumers are willing to pay exactly what it costs to produce the last unit of a good, leading to an optimal quantity being produced and consumed. When the price is set above the equilibrium price, fewer consumers can afford the product, leading to a decrease in consumer surplus, which is the benefit consumers receive from paying less than they are willing to pay. Additionally, a price above equilibrium creates deadweight loss, which is the lost welfare that occurs because some transactions that would have benefited both consumers and producers no longer happen. For example, if the price of apples is set too high, fewer people buy them, and the potential happiness from those unmade purchases is lost, leading to inefficiency in the market.