Answer to Question #224451 in Microeconomics for jenni

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

In this case, the quantity will increase since the other prices that could be used in the extra prices, would be used in purchasing more products. When the cost of production decreases, automatically the price of the product will be increased. Hence, the consumer surplus will increase.