Answer
a) The market price falls and the market quantity increases.
b) Consumer surplus increases, and producer surplus might increase.
c) Consumers benefit from falling production prices.
Work Step by Step
a) Please see the first graph. The supply curve is shifted to the right. Thus, the market price falls and the market quantity increases.
b) On the first graph, the original consumer surplus is $A$, and the original producer surplus is $B+E$. With the shift in the supply curve, consumer surplus is now $A+B+C+D$ (an increase of $B+C+D$). With the shift in the supply curve, producer surplus is now $E+F+G$ (a change of $F+G-B$).
$F+G-B$ can be either positive or negative.
c) Please see the second graph.With a decrease in input costs, the supply curve falls (from $S$ to $S_{1}$). Consumer surplus increases from $A$ to $A+B$.
