Answer to Question #267106 in Microeconomics for lucas

Question

Using the following graph, show what happens to consumer surplus when a new technology reduces the cost of production

Answer 1

It causes the consumer surplus to increase. The diagram shows the effect of new technological advance. Initially the equilibrium in computer market is at b, but due to improvement in technology supply curve shifts and new equilibrium established at d. The supply curve shifts to the right thus increasing consumer surplus