Continuing your analysis of the competitive US manufacturing industry from Question 1, with demand of Qd = 300 – 4P and supply of Qs = 2P – 60, suppose a technological innovation causes the supply curve to increase, shifting the curve down by $30 for every given quantity Q. Determine the new supply equation. (Hint: What approach have you used to model taxes and subsidies in previous assignments?) Solve for equilibrium price P2 and quantity Q2. Depict the original supply S1, the new supply S2, and the original demand D1 on the usual P, Q diagram. Label all intercepts (including two intercepts for the demand curve and one intercept for the supply curve). Clearly indicate and label the new market equilibrium. Graphically indicate the areas of Consumer Surplus (CS2) and Producer Surplus (PS2) that resulted from the new market equilibrium. Compute the values of Consumer Surplus (CS2) and Producer Surplus (PS2) associated with the new market equilibrium, clearly indicating the units that CS and PS are measured in. Who has benefited from technological innovation, based on the comparison of CS and PS in Questions 1 and 2? Consumers, producers, or both? Why? (Narrative response; suggested length of three to four sentences or one paragraph.)
Continuing your analysis of the competitive US manufacturing industry from Question 1, with
causes the supply curve to increase, shifting the curve down by $30 for every given quantity Q.
Determine the new supply equation. (Hint: What approach have you used to model taxes
and subsidies in previous assignments?)
Solve for
Depict the original supply S1, the new supply S2, and the original demand D1 on the
usual P, Q diagram. Label all intercepts (including two intercepts for the demand curve
and one intercept for the supply curve). Clearly indicate and label the new
equilibrium
Graphically indicate the areas of
that resulted from the new market equilibrium.
Compute the values of Consumer Surplus (CS2) and Producer Surplus (PS2) associated
with the new market equilibrium, clearly indicating the units that CS and PS are
measured in.
Who has benefited from technological innovation, based on the comparison of CS and
PS in Questions 1 and 2? Consumers, producers, or both? Why? (Narrative response;
suggested length of three to four sentences or one paragraph.)
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