Suppose a technological advance reduces the cost of making computers.

2. Suppose a technological advance reduces the cost of making computers. A. Draw a supply-demand diagram to show what happens to price, quantity, consumer surplus, and producer surplus in the market for computers. Who gains most? B. Computers and adding machines are substitutes. Draw a supply-demand diagram to show what happens to price, quantity, consumer surplus, and producer surplus in the market for adding machines. Should adding machine producers be happy or sad about falling computer prices? C. Computers and software are complements. Draw a supply-demand diagram to show what happens to price, quantity, consumer surplus, and producer surplus in the market for software. Should Bill Gates producers be happy or sad about falling computer prices? D. What lesson do you take away from this example concerning how we might think about shrinking sectors in the economy? 3. Imagine a society that produces military goods and consumer goods, which well call guns and butter. A. Draw