Answer to Question #100922 in Microeconomics for Usman Tariq

Question

Assume that there are increasing returns to scale; when the production is increased, the long-run average cost is? The demand for a product is said to be price elastic when? For a price inelastic good, when the price increases, this means?

Answer 1

1. When production grows in conditions of increasing returns to scale, the long-run average cost will reduce providing increase of income.
2. The demand for a product is price elastic if growth of product price causes great decrease of sales.
3. For a price inelastic good the volume of consuming remains unchanged when the price increases.