Question: Suppose a technological advance reduces the cost of making computers. a. Draw a supply-and-demand diagram to show what happens to price, quantity, consumer surplus, and

Suppose a technological advance reduces the cost of making computers.

a. Draw a supply-and-demand diagram to show what happens to price, quantity, consumer surplus, and producer surplus in the market for computers.

b. Computers and typewriters are substitutes. Use a supply-and-demand diagram to show what happens to price, quantity, consumer surplus, and producer surplus in the market for typewriters. Should typewriter producers be happy or sad about the technological advance in computers?

c. Computers and software are complements. Draw a supply-and-demand diagram to show what happens to price, quantity, consumer surplus, and producer surplus in the market for software. Should software producers be happy or sad about the technological advance in computers?

d. Does this analysis help explain why software producer Bill Gates is one of the world’s richest men?

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a The effect of falling production costs in the market for computers results in a shift to the right in the supply curve as shown in Figure As a resul... View full answer

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