Suppose you want to buy a popular brand of digital camera. Every ...

[CORALGRILL2014]

Suppose you want to buy a popular brand of digital camera. Every store in town is out of stock. You are willing and able to pay the current market price of 300 for a camera, but you cannot find any available.
 
  Is the market for the digital camera in equilibrium? If not, is the market equilibrium price of the camera above or below 300? Use supply and demand analysis to explain your answer.

Question 2

What is meant by increasing returns to scale?
 
  What will be an ideal response?

[ong527]

Answer to Question 1

No, the market for the digital camera is not currently in equilibrium because there is a shortage of the camera at the current price of 300 . This implies that the market equilibrium price is greater than 300 .

Answer to Question 2

Increasing returns to scale implies that an increase in the firm's scale of production leads to lower average costs per unit produced.

[CORALGRILL2014]

Excellent

[ASDFGJLO]

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