Question

Why is any price above or below the clearing price inefficient?

Answer 1

Note from the Supply/Demand curve at Price points other that
`P_E => "for AA (P,Q): D(P,Q) = S(P,Q)` the market does not clear.
That is there will be either a surplus or shortage. This two cases result in either:
1) Shortage `=>`an inefficient allocation of resources. The price set at `P_L` but the buyer derive a benefit of `P_H`. So this misallocate the resources.
2) Surplus`=>` Marginal Cost Exceeds Marginal Benefit. In the case price is set at `P_H` and only a quantity `Q_L` less that the supplied quantity `Q_H` is cleared. Production is at `MC=P_H` but `MB=P_L`. So there is profit loss...