Economics

posted by .

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

  • Economics -

    Ok, in your graphs, have both the supply curve and the demand curve touch the Y-axis.
    Consumer surplus is represented by the area below the demand curve but above equilibrium price.
    Producer surplus is represented by the area above the supply curve but below equilibrium price.
    Now shift the supply curve. What is the new area of consumer surplus? What is the new area of producer surplus?
    (With the increase in supply, consumer surplus should have unambigiously grown. The change in the size of producer surplus is uncertain -- could be bigger could be smaller)

  • Economics -

    what is a definition on the concept additional consumer surplus to initial consumers

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. Economics

    I am taking Microeconomics. I have the following question: 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 falling production costs on the price …
  2. business

    I am taking Microeconomics. I have the following question: 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 falling production costs on the price …
  3. Economics

    I am taking Microeconomics. I have the following question: 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 falling production costs on the price …
  4. Microeconomics-Consumer & Producer Suplus Graphs

    Can anyone help? I am trying the draw the following graphs for Consumer & Producer Suplus. I have made several attempts and I know I am not drawing them right. 1) The cost of producing stereo systems has fallen over the past several
  5. home economics

    Graphing : Mooville is a small town in texas. assume that beef is a normal good. what happens to the amount of beef dfemanded or supplied in each of the following cases?
  6. managerial economics

    Question #6 The owner of Taco Joe’s has estimated that if he lowers the price of a burrito from $2.00 to $1.50, he will increase sales from 400 to 500 burritos per day. The demand for burritos is A) elastic. B) inelastic. C) unitary …
  7. Economic

    1. Use the following information to answer the questions below. Please note that output of good X is measured in 100’s on the x axis, i.e. if you find Q = 10 then output is 10 × 100 = 1, 000 units. You must have a diagram to support …
  8. Economic

    1. Use the following information to answer the questions below. Please note that output of good X is measured in 100’s on the x axis, i.e. if you find Q = 10 then output is 10 × 100 = 1, 000 units. You must have a diagram to support …
  9. microeconomics

    The cost of producing flat-screen TVs has fallen over the past decade. Let’s consider some implications of this fact. A.) Draw a supply-and-demand diagram to show the effect of fallen production costs on the price and quantity of …
  10. economics

    6)Assume the graph below represents the market demand for a patented prescription drug together with the firm-level marginal cost and average cost functions for producing the drug. Assume these cost curves do not reflect R&D costs …

More Similar Questions