How Continuous Innovation Affects Supply, Producer Surplus, and Consumer Surplus
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This Demonstration shows producer surplus (PS), consumer surplus (CS), and total surplus (TS) when there are parallel shifts in supply and divergent pivotal shifts in supply . Innovations that favor low-productivity/high-cost producers create divergent pivotal shifts in supply, which can be simulated by increasing the slope of the supply curve while keeping the intercept constant. On the other hand, innovations that create similar benefits to both the high-productivity/low-cost producers and low-productivity/high-cost producers create parallel shifts in supply. Rightward parallel shifts in supply can be simulated by decreasing the intercept of the supply curve while keeping the slope constant.
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Contributed by: John B. Horowitz, Michael A. Karls, Juan Sesmero, and T. Norman Van Cott (May 2015)
The idea for labeling curves and shading regions is based on code from "Consumer and Producer Surplus" by Fiona Maclachlan.
The idea for selecting curves to display via checkboxes is based on code from "The Backward-Bending Supply Function in Fisheries" by Arne Eide.
Open content licensed under CC BY-NC-SA
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Reference
[1] J. B. Horowitz, M. A. Karls, J. Sesmero, and T. N. Van Cott. "Teaching Students How Continuous Innovation Affects Supply, Producer Surplus, and Consumer Surplus." Ball State University Department of Economics Working Paper Series, ECWP201415, 2015. cms.bsu.edu/academics/collegesanddepartments/mcob/majors-and-degrees/depts/economics/facultyresearch/workingpaperseries.
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