11. The cost of producing flat-screen TVs has fallen over the past decade. Let’s consider some implications of this fact. a.Draw a supply-and-demand diagram to show the effect of falling production costson the price and quantity of flat-screen TVs sold.b.In your diagram, show what happens to consumer surplus and producer surplus.c.Suppose the supply of flat-screen TVs is very elastic. Consumers benefit most from falling production costs of these TVs because the price of televisions are decreasing and shifts the supply curve to the right. The consumer surplus will increase as well. 12. Suppose a technological advance reduces the cost of making computers.
Chapter 8: Application: The Costs of Taxation1.We learned in class that a tax creates a deadweight loss (DWL) in our market. Draw a supply-and-demand diagram to show the DWL and the tax revenue.2.Looking at a market at a very shallow level, it seems that a well-functioning market is much more efficient when it is left alone. It also seems that taxation is not good for us
because it creates a DWL. The government should impose tax because the money that thegovernment gets from taxes goes to help the people and improve their lives. For example,they give some of the money to education, health care, and to better the world around us like roads and bridges. 3.The elasticities of supply and demand affect the deadweight loss of a tax because normally the more elastic good is going to have a higher DWL. The more someone is dependent on a good effect how much someone is going to buy that good.