Question

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?

a.Price will fall, and the effect on quantity is ambiguous.
b.Price will rise, and the effect on quantity is ambiguous.
c.Quantity will fall, and the effect on price is ambiguous.
d.Quantity will rise, and the effect on price is ambiguous.

Answer 1

a.Price will fall, and the effect on quantity is ambiguous.

Step-by-step explanation:

If traditional cameras became more expensive, quantity demanded would reduce.

If the price of digital cameras fell, the quantity demanded of digital cameras would increase. The demand for traditional cameras would fall as more customers would substituite traditional cameras for digital cameras. The demand curve would shift to the left.

If the cost of the resources needed to manufacture traditional film falls and more firms decide to manufacture traditional film, supply would increase and the supply curve would shift to the right.

The combined effect of the leftward shift of the demand curve and the rightward shift of the supply curve would cause equilibrium price to fall and effect on equilibrium quantity would be ambiguous.

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