It could go one of two ways. Either people buying more cameras will make prices drop, or they could make them rise.
You do realize that you also pay for R&D in a camera when you buy it right? Let's say more people buy 40Ds, Canon starts working on a new camera, the prices in the 40D will most likely stay the same or even rise due to new R&D costs.
Also, if people are willing to pay more for the same goods, companies will raise their prices. Why do you think gas prices are so high and Exxon is turning the biggest profits they've ever seen in a quarter?
No, sorry, but you've missed something critical to what I said earlier -- supply. If the product in question had a significant limitation in supply, then, yes, demand could outstrip supply leading to a theoretical price increase (theoretical because of market forces that don't need to be discussed here (and that make my Chicago School friends sick to their stomachs)).
Or, to answer your question, why is gas so expensive?
OPEC.
(Oh, and the fact that refineries can only process certain amounts at a time, and that new refineries are difficult and expensive to build, meaning that supply is relatively inelastic and has failed to outpace demand over the last few years, and that there are complicated relationships between the various refiners, distributors, etc... Truth be told, the question of gas pricing is extremely complicated, and I'm over-simplifying the heck out of it -- to say "OPEC" is to tell about a tenth of the story, if that. But "inelastic supply" is a good place to start. Anyways...)
But that's why I noted that there was no apparent limitation on supply in the camera market. Cameras are not made up of any raw material that's hard to obtain, and to my knowledge camera manufacturing has usually (though probably not always) been able to keep up with demand despite recent demand increases. I'd guess (and I've been assuming) that the supply in this market is sufficiently elastic to almost always meet demand in a reasonably timely fashion, and that competition is sufficiently strong to provide a manufacturer with incentives to supply as much as it can sell (market demand curves and all, you know?). If that's wrong, of course, then I'm wrong -- but that's the assumption I'm making.
If supply is elastic, then anything other than a sharp spike in demand will likely be met by a resulting increase in supply. At the same time the increased supply has a backside benefit - scale. As supply increases, economies of scale are likely to increase, resulting in cost savings. In a highly competitive market, those cost savings are likely to result in price cuts or increased innovations. Simple as that -- so I guess I still don't understand your disagreement. :er:
To the R&D costs, again, sorry, but you're way off. Economies of scale don't reset -- in part because Canon doesn't (as your example would require) observe consumer demand levels and then decide whether they want to do R&D for future products. They're always doing R&D, so if there are ways to make that R&D cheaper or better...great. Economies of scale make R&D cheaper and/or better.
For your view to work, we'd have to assume that Canon built the 40D, saw customer demand for it, and decided to do more R&D than they otherwise would have -- AND that such additional R&D was so costly that it
more than offset the economies of scale. But...why would Canon have done that? (Putting aside the fact that Nikon would then eat their lunch.) Or, more directly, why would increased consumer demand influence Canon's decision to increase R&D to a level exceeding its profit-maximizing point? Simply put, they wouldn't - there's just no reason for them to do that (unless they...you know...just don't like money.)
Anyways, back to work.
" smiley. I even admitted that the other poster had far more experience in the application of economics than I did. I'm just a college kid, and a linguistics major at that. You think I should be better educated in the way of the domestic and international markets, then write your congressman.
![[No title]](/data/xfmg/thumbnail/32/32005-d13a0bcc56327c42bd32dff4b0776658.jpg?1734160798)
