Lowering the price of a good below the equilibrium price creates consumer surplus because it increases the quantity demanded while decreasing the quantity supplied. However, there seems to be a misunderstanding in the options provided.
When the price is lowered:
- Quantity produced decreases: This is because producers are less incentivized to supply the product at a lower price.
- Consumer demand increases: Lower prices make the good more attractive to consumers, leading to an increase in quantity demanded.
This scenario creates consumer surplus, which is the difference between what consumers are willing to pay for a good and what they actually pay.
None of the options provided precisely capture this relationship. However, the most relevant statement in the context would imply that the quantity produced decreases while consumer demand increases, though this is not one of the exact options listed. The correct reasoning is that lowering the price increases consumer surplus by enabling more consumers to purchase the good at a lower price, despite the reduction in quantity that producers are willing to supply.
So, the best answer among the options given is:
Quantity produced decreases, but consumer demand increases.