All else 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

An increase in the price of a good would result in a decrease in consumer surplus because consumers would have to pay more for the same amount of the good. All else being held constant, there would not necessarily be an increase in social welfare or an increase in the supply of the good, as these depend on other factors. The increase in price could also potentially decrease producer surplus, but this is not necessarily true as it would depend on the elasticity of demand for the good. Finally, an increase in price would not necessarily increase consumer surplus, as stated earlier.

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