Toyota announced in September 2013 that it is committed to hybrid, gasoline-elec

Question

Toyota announced in September 2013 that it is committed to hybrid, gasoline-electric, and hydrogen fuel cell vehicles to displace the use of gasoline.

What happens to the consumer surplus in the market for crude oil as a result of the shift in demand?

a. Decreasing by D+E

b. Decreasing from E+F+G+H to H

c. Increasing from C+G to A+B+C+D

d. Increasing from H to E+F+G+H

e. Decreasing from A+B+C+D to C+G

f. Stays the same

What happens to producer surplus in the market for crude oil as a result of the shift in demand?

a. Decreasing by D+E

b. Decreasing from E+F+G+H to H

c. Increasing from C+G to A+B+C+D

d. Increasing from H to E+F+G+H

e. Decreasing from A+B+C+D to C+G

f. Stays the same

Explanation / Answer

(1) Option (e)

Before shift in demand, Consumer surplus (CS) = Area between demand curve & price = A + B + C + D

After shift in demand (when demand curve shifts left to the dotted line), CS = C + G

(2) Option (b)

Before shift in demand, Producer surplus (PS) = Area between supply curve & price = E + F + G + H

After shift in demand, PS = H

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