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25 June, 18:50

When the price of wood (which is an input in the production of furniture) falls, the consumer surplus associated with the consumption of furniture?

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  1. 25 June, 21:23
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    The consumer surplus associated with the consumption of furniture increases. Wood is an input in the production of furniture therefore it constitutes the cost of production, the decrease in the price of wood would therefore mean a decrease in the production cost. A decrease in the cost of production in turn causes a decrease in the buying price of furniture and therefore, consumer surplus increases.
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