If a social planner decides to intervene in a market in which supply and demand are determining equilibrium price and quantity. On a diagram of this market, indicate the reduction in total surplus that would occur if the planner decided to reduce production of the good. Explain in words. On another diagram, indicate the reduction in total surplus that would occur if the planner decided to increase production of the good. Explain.

Question

If a social planner decides to intervene in a market in which supply and demand are determining equilibrium price and quantity.  On a diagram of this market, indicate the reduction in total surplus that would occur if the planner decided to reduce production of the good.  Explain in words.  On another diagram, indicate the reduction in total surplus that would occur if the planner decided to increase production of the good.  Explain.

anonymous · Answer

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According to my graph I drew, I would assume that total surplus decreases right? Because the area has decreased.
The main problem I'm having with this question, is that I don't get the what concepts/principles of Microeconomics we are meant to apply in order to answer this question.