1. Please draw a regular shaped supply and demand curve, in a perfectly

competitive market, mark consumer surplus, producer surplus and total surplus.
2. Consider the same market, if the price of inputs has decrease, what would you expect to change? Reflect the change in a graph. Mark the original PS and new PS. Call this new PS as PS1.
3. Consider the same market except this time we have a relatively steeper supply curve. With the same change of input prices, find the new PS, call it PS2. Compare PS1 and PS2, which one is bigger?
4. Use the same graph in, assume now for some reason, the price is set 2 times higher, would this cause any inefficiency? If so, find DWL on a graph and explain in words why your marked area is DWL.