Other things equal, a fall in the market price caused by a change in supply will
a. decrease consumer surplus.
b. increase producer surplus while leaving consumer surplus unchanged.
c. increase consumer surplus.
d. decrease producer surplus while leaving consumer surplus unchanged.
Answer: c. increase consumer surplus.
The increase in supply decreases the price and increases the quantity.
Consumer surplus =0.5*( consumer reservation price - equilibrium price)*Q
The Q increases and equilibrium price decreases so both effects increases the consumer surplus as the consumer reservation price is same.
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