1) Suppose the cost of producing computers has fallen over the past decade due to technological advancement. (Use 3 steps in part a) and part b))

A) Use a supply and demand diagram to show and explain what happens to price, quantity, and consumer surplus (CS) in the market for computers as a result of technological advancement. Clearly show and explain P1, P2, Q1, Q2, CS1 and CS2.

B) Computers and software are complements. Use a supply and demand diagram to show and explain what happens to price, quantity, and producer surplus (PS) in the market for software due to changes in the market for computers. Clearly explain P1, P2, Q1, Q2, PS1 and PS2. Should software producers be happy or sad about the technological advances in computers?

C) Does your analysis above help explain why software producer Bill Gates is one of the world's richest men? Explain using the producer surplus concept in part b above.