Question

Suppose in the market for lattes there is an improvement in latte technology, which allows lattes to be produced at lower costs. We can say for certain that in the latte market

A. consumer surplus will increase and total surplus will increase.
B. consumer surplus will increase but total surplus will decrease
C. consumer surplus will decrease and total surplus will increase.
D. consumer surplus will decrease and total surplus will decrease

Answer 1

A. consumer surplus will increase and total surplus will increase.

Step-by-step explanation:

In the case when there is an improvement in the latte technology that permits to generate at the lesser cost this would decrease the production cost that improve the profit margin as a result the production and the supply would increased

Also if the supply would rise so there is a reduction in the equilibrium price but rise in equilibrium quantity

So, the first option is correct