Question

All things being equal, when suppliers become willing to charge less, what happens to consumer surplus?

Consumer surplus increases

Suppliers go out of business

Consumer surplus decreases

Consumer surplus remains unchanged

What would occur if the costs of a necessary input increases?

The supply curve will shift to the right.

The supply curve will shift to the left.

The quantity supplied will decrease along the supply curve.

The quantity supplied will increase along the supply curve.

Answer 1

The consumer surplus is the difference between the price that consumers pay and the price and the price that they are willing to pay. If the sellers lower the price the consumer surplus will increase. CS P E1 At a price of OP the consumer surplus is PQE. When the suppliers reduce the price to P1, the consumer surplus increase from PQE to P1QE1. Answer: Consumer surplus increase. The supply of a commodity changes with the changes in cost of production. An increase in input price reduces the supply of a product. The supply curve shift to the left and price increase. The movement along the supply curve occurs in response to a price change. Price P1 Q1 Q Quantity The increase in the cost of necessary inputs shifts the supply curve to the left from S to S1. The price increase from P to P1. Answer: The supply curve will shift to the left.