Question

Digital camera has gained popularity in recent years over traditional cameras that rely on old-fashioned 33MM film. What will happen to the equilibrium price and quantity of traditional camera film if traditional cameras become more expensive, digital cameras become cheaper, the cost of the resources needed to manufacture traditional film falls, and more firms decide to manufacture traditional film?

Hints: (1) In your answer, first, sketch the Supply and Demand graphs at initial equilibrium for the two markets, one for Traditional Camera film, and another for digital cameras.

(2) Next, determine which curves (Supply, Demand or both) of the two markets may be changed as a result of the events described in the opening scenario and in which direction and indicate this on your graph.

Finally, Determine the outcome on equilibrium price and quantity of traditional Camera film. Keep in mind that if we are discussing changes to both supply and demand curves simultaneously, one of the equilibrium variables will be ambiguous. Describe your answer to part 3 in words as well as in your graph.

Answer 1

Question :

Answer :

Part 1 : As traditional cameras become more expensive, the demand of traditional cameras decreases, which in turn shifts the demand curve of traditional camera film to shift left, causing a decrease in both equilibrium quantity and prices.

Part 2 : As digital cameras become cheaper, demand for digital cameras increases that reduces the demand for digital cameras thereby shifting the demand curve of traditional camera film to left, causing a decrease in both equilibrium quantity and prices.

Part 3 : As the cost of inputs of manufacturing traditional camera film decreases, this led to the more production of traditional camera film which in turn shifts the supply curve of traditional camera film to right, causing an increase in equilibrium quantity and a decrease in equilibrium prices.

Part 4 : When more firms plans to produce traditional camera film, there is more production of traditional camera film which in turn shifts the supply curve of traditional camera film to right,causing an increase in equilibrium quantity and a decrease in equilibrium prices.