The furniture indastry operates in a perfect macket. There are two groups of produces soute producers and northern producers, each including many identical producers. Public infrastructure is more developed and as a result productivity is higher in the south than in the north. Assume that in the initial equilibrium the quantity of furniture supplied by southern producers is 1,000 units and the quantity supplied by northern producers is 500 units. a. Demonstrate this equilibrium in an appropriate diagram b. Now assume that following a major project to develop infrastructure in the north, the productivity of them producers improved, and at the initial price their quantity supplied rises to 1,000 units. Demonstrate the new equilibrium in the diagram. c. What will happen to the equilibrium price, quantity supplied by each group of producers, and quantity demanded in this market? Who benefits and who loses (if any) from this development? d. What is the effect on revenues in the market and for each sector?
