Suppose the equilibrium price of bicycle tires is $42, but the market price falls to $37. Jerry can still make a profit at this lower price, so they stay in business. Anat, who could make a small profit by selling tires at $42, goes out of business as the price falls. Madison bought tires at the higher price from Anat and is delighted to buy them at a lower price from Jerry. Marcus, who previously did not purchase tires, is now willing to pay the lower price, so they buy new tires from Jerry. Which individual's actions contribute to a reduction in consumer surplus?
Suppose the equilibrium price of bicycle tires is $42, but the market price falls to $37. Jerry can still make a profit at this lower price, so they stay in business. Anat, who could make a small profit by selling tires at $42, goes out of business as the price falls. Madison bought tires at the higher price from Anat and is delighted to buy them at a lower price from Jerry. Marcus, who previously did not purchase tires, is now willing to pay the lower price, so they buy new tires from Jerry. Which individual's actions contribute to a reduction in consumer surplus?
Chapter1: Making Economics Decisions
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