The cost of producing DVD players has fallen over the past few years. Let’s consider some implications of this fact. a. Use a supply-and-demand diagram to show the effect of falling production costs...

The cost of producing DVD players has fallen over the past

few years. Let’s consider some implications of this fact.

a. Use a supply-and-demand diagram to show the effect of

falling production costs on the price and quantity of DVD

players sold.

b. In your diagram, show what happens to consumer surplus and producer surplus.

c. Suppose the supply of DVD players is very elastic. Who

benefits most from falling production costs – consumers

or producers of DVD players?