Answer to Question #204252 in Microeconomics for Charmelle Gertse

Question

When there is a technological advancement in the cellphone industry, consumer surplus in that market will

Answer 1

Solution:

When there is a technological advancement in the cellphone industry, consumer surplus in that particular market will increase.

This is because technological advancements enhance production efficiency, reducing the cost of production and as a result, the prices of the goods will go down. Consumers will, therefore, demand more of the cellphones at reduced prices. Therefore, consumers will experience an excess benefit, since they will be purchasing the cellphones at much lower prices than they were willing to pay.