Final answer:
When the price of a product falls from $10 to $5, consumer surplus would increase due to the improved deal that consumers are getting, and quantity demanded would likely increase due to the product becoming more affordable. Option 1 and 3 is correct answer.
Step-by-step explanation:
If the price of a product drops from $10 to $5, we can expect several economic effects based on the law of demand and the law of supply. The first is an increase in consumer surplus, which is the difference between what consumers are willing to pay for a product and what they actually pay. A decrease in price usually means that consumers are getting a better deal, leading to an increase in consumer surplus.
Secondly, the quantity demanded would likely increase because, according to the law of demand, as price decreases, demand increases since more consumers find the product affordable and are willing to buy it. However, the price reduction would have an opposite effect on the quantity supplied. Producers may be less incentivized to supply the same amount of product at a lower price, potentially leading to a decrease in quantity supplied, unless the product features elastic supply where the quantity supplied doesn't decrease significantly.
From the given choices, the increase in consumer surplus and the increase in quantity demanded are the most likely outcomes due to the price decrease. It is unlikely that the quantity supplied would increase with a decrease in price unless there are other factors at play that have not been mentioned in the scenario. Therefore, the correct option from the ones provided is that consumer surplus would increase and quantity demanded would likely increase as well.