Sunday
October 26, 2014

Homework Help: Economics

Posted by G on Tuesday, March 11, 2008 at 11:04am.

I have the following question in my assignment:

The cost of producing stero systems has fallen over the past several decades.

A:Use the supply-and-demand diagram to show the effects of fallaing production costs on the price and quantity of steros sold.

B:In you diagram, show what happens to consumer surplus and producer surplus.

I understand what is happening. I can draw the graph for A. I can't draw the graph for B.

The text gives the following two examples. I understand them. I can't draw the graph properly for when the price is going down.

Sorry, the following are the best I could do to try to draw the examples of the graphs.

Consumer Suplus
~
~~
~~~~~~~
~~~~~~~~Initial Consumer Surplus
~~~~~~~~~~
~~~~~~~~~~~~~
P1XXXXXXXXXXXX__>>>>>>>>>
Additonal_______>>>>>>>>>>Consumer
Consumer Surplus>>>>>>>>>>>Surplus to
to initial_______>>>>>>>>>>>New
Consumers________>>>>>>>>>>>>Consumers
P2XXXXXXXXXXXXX__>>>>>>>>>>>>>
_________________Q1__________Q2

Producer Surplus

P2XXXXXXXXXXXXXXX>>>>>>>>>>
AdditionalXXXXXXX>>>>>>>>Producer
ProducerXXXXXXXXX>>>>>>Suplus to New
Surplus toXXXXXXX>>>>Producers
Initial Producers>>>
P1XXXXXXXXXXXXXXX>>
~~~~~~~~~~~~~~~
~~~~~~~~~~~~ Initial Producer Surplus
~~~~~~~~~~
~~~~~~~~
~~~~~
~~
_________________Q1________Q2

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