All else being held constant,an increase in the price of a good would necessarily:
A) increase social welfare.
B) decrease producer surplus.
C) decrease consumer surplus.
D) increase consumer surplus.
E) increase the supply of the good.

Question

Quizplus · Accepted Answer

A price increase would decrease consumer surplus because consumers are paying more for the same amount of the good, resulting in a decrease in their welfare. Producer surplus may or may not decrease depending on the price elasticity of demand and supply, but it is not a necessary outcome. Social welfare also may or may not increase or decrease depending on the specific circumstances, but it is not necessarily affected by a price increase alone. An increase in the supply of the good is not relevant to the question as it is asking about the effect of a price increase.

All Else Being Held Constant,an Increase in the Price of a Good