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 toto initial_______>>>>>>>>>>>NewConsumers________>>>>>>>>>>>>ConsumersP2XXXXXXXXXXXXX__>>>>>>>>>>>>>_________________Q1__________Q2Producer SurplusP2XXXXXXXXXXXXXXX>>>>>>>>>>AdditionalXXXXXXX>>>>>>>>ProducerProducerXXXXXXXXX>>>>>>Suplus to NewSurplus toXXXXXXX>>>>ProducersInitial Producers>>>P1XXXXXXXXXXXXXXX>>~~~~~~~~~~~~~~~~~~~~~~~~~~~ Initial Producer Surplus~~~~~~~~~~~~~~~~~~~~~~~~~_________________Q1________Q2
Have both the supply curve and the demand curve touch the Y- axis in your graphs. Above equilibrium price is the area below the demand curve where the consumer surplus is. Above the supply curve but below the equilibrium price is the area where the producer surplus is represented. The supply curve needs to be shifted. Where is the new area of consumer surplus located? Where is the new area of producer surplus located? The consumer surplus should have grown because of the increase in supply. The change in the size of the producer surplus is not certain.
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What is the defination of the concept of additional consumer surplus to initial consumers?
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