Answered: One of the largest changes in the…

Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781305971509

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter7: Consumers, Producers, And The Efficiency Of Markets

Section: Chapter Questions

Problem 9PA

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Question

One of the largest changes in the economy
o ver the past several decades is that technological
advances have reduced the cost of making
computers.
a. Draw a supply-and-<lcmand diagram to show
what happened to price_, quantity, consumer
surplus, and producer surplus in the market for
computers.
b. forty years ago, students used typewriters to
prepare papers for their classes; today they
usc computers. Docs that make computers and
typewriters complements or substitutes? Usc
a supply-and--demand diagram to show what
happened to p rice, quantity, consumer surplus_,
and producer surplus in the market for typewriters.
Should typewriter producers have been
happy or sad about the technological advance in
computers?
c. Arc computers and software complements or
substitutes? Draw a supply-and-demand diagram
to show what happened to price, quantity,
consumer surplus, and producer surplus in the
market for software. Should software producers
have been happy or sad about the technological
advance in computers?
d. Docs this analysis help explain why software
producer Bill Gates is one of the world's richest
people?

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

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