Rising cotton prices have forced quilters to switch from fabric to linen. What happened to consumer surplus in the market for linen, assuming supply held steady and the market sells at the equilibrium price?

Question

Quizplus · Accepted Answer

With the increase in demand for linen due to the rise in cotton prices, the equilibrium price in the market for linen will increase. This will result in an increase in producer surplus, but it may also lead to an increase in consumer surplus. Since some quilters will have a higher willingness to pay for linen fabric than the equilibrium price, they will be able to purchase it at a lower price than what they would have been willing to pay, resulting in an increase in their consumer surplus. Thus, consumer surplus will be larger after the increase in demand.

Rising Cotton Prices Have Forced Quilters to Switch from Fabric