Asked by Stecy Franck on May 07, 2024

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If there is a decrease in supply (parallel shift of demand to the right) ,assuming a positively sloped supply curve and a negatively sloped demand curve,total surplus:

A) will increase.
B) will decrease.
C) will remain the same.
D) may change,but we can't tell how.

Positively Sloped

A line or curve on a graph that increases in value as it moves from left to right, indicating a direct relationship between two variables.

Negatively Sloped

A descriptor for a line on a graph that moves downwards from left to right, indicating an inverse relationship between the variables plotted.

Total Surplus

The total net gain to society from creating and consuming goods and services, encapsulated by the combination of consumer and producer surplus.

  • Explore the effects of modifications in supply and demand on the cumulative surplus.
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Verified Answer

FI
Farhan IslamMay 10, 2024
Final Answer :
B
Explanation :
If there is a decrease in supply (parallel shift of demand to the left), it will cause a decrease in the equilibrium quantity and an increase in the equilibrium price. This decrease in quantity traded will result in a reduction in consumer surplus and producer surplus, leading to a decrease in total surplus. Therefore, the correct choice is B, which states that total surplus will decrease.