1. You are given an economic advisor to evaluate a certain competitive US manufacturing industry. Your (accurate) statistical analysis indicates the market is characterized by demand of Qd= 500 -8Pand supply of Qs= 4P -100.

*Solve for equilibrium priceP1and quantityQ1.

*Depict the supply curve S1and demand curveD1on the usual P, Q diagram. Label all intercepts(including two intercepts for the demand curve and one intercept for the supply curve). Clearly indicate and label the market equilibrium.

*Graphically indicate the areas of Consumer Surplus (CS1) and Producer Surplus (PS1). *Compute the values of consumer Surplus (CS1)and Producer Surplus (PS1), clearly indicating the units that CS and PS are measured in.

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1B. Continuing your analysis of the competitive US manufacturing industry from 1, with the demand of Qd= 500 -8Pand supply of Qs= 4P -100, suppose a technological innovation causes the supply curve to increase, shifting the curve down by $15for every given quantity (Q).

*Determine the new supply equation.

*Solve for equilibrium price P2and quantityQ2.

*Depict the original supplyS1, the new supplyS2, and the original demand D1on the usual P and Q diagram. Label all intercepts(including two intercepts for the demand curve and one intercept for the supply curve). Clearly indicate and label the new market equilibrium.

*Graphically indicate the areas of Consumer Surplus (CS2) and Producer Surplus (PS2)that resulted from the new market equilibrium.

*Compute the values of consumer Surplus (CS2)and Producer Surplus (PS2) associated with the new market equilibrium, clearly indicating the units that CS and PS are measured in.

*Who has benefited from technological innovation, based on the comparison of CS and PS in 1 and 1B? Consumers, producers, or both? Why please explain...