Question

One of the largest changes in the economy over the past several decades is that technological advances have reduced the cost of making computers. Show the effect of the reduction in production costs on the market for computers.

Answer 1

Explanation:

Over the past several decades, advances in technology, greatly reduced the cost of making computers which resulted in the decline of the equilibrium price of  computers and also resulted in increased equilibrium quantity. The reduction in the computer prices also caused an increase in the consumer surplus.

computer price down -> equilibrium price down

computer price down -> equilibrium quantity up

computer price down -> consumer surplus up

The producer surplus increases due to increase in quantity and at the same time producer surplus decreases due to decrease in price.

computer price down ->  producer surplus down

computer quantity up -> producer surplus up