Answer to Question #223170 in Microeconomics for gemma

Question

Suppose that the price of materials used to produce computer hardware, such as graphics cards, is decreased. Show what occurs to price, quantity, consumer surplus, producer surplus, and total surplus in the market for computers graphic cards using a supply-and-demand diagram (draw a graph). Furthermore, provide five explanations for what occurred.

Answer 1

If the price of materials used to produce computer hardware, such as graphics cards, is decreased, then the supply of computer hardware will increase, as a result the price will decrease, quantity will increase, consumer surplus will increase, producer surplus may either increase or decrease, and total surplus in the market for computers graphic cards may also either increase or decrease.