Suppose an increase in product demand occurs in a decreasing-cost industry.
If there is a decrease in the cost of a product, there is a decrease in the cost of a product. And a decreasing-cost industry might be one in which one company is able to produce more product at a lower cost. Imagine, for instance, that manufacturers of large-volume medical equipment made their product more cost-efficient by using the latest technology, or that small-business owners used to be able to sell their product more cheaply.
The idea that the cost of a product can decrease (or that a company is able to increase its efficiency) by using more efficient technology is called “supply-side economics.” In its simplest terms, supply-side economics says that a company (or a small business) that increases its production by using a new technology is able to produce more product at a lower cost.
This is one of the things that has made it so challenging for entrepreneurs to make money in the past. This is especially true when there are two or more competing companies that are trying to get in on the same market. For example, in the automobile industry, General Motors needed a new engine because the old one was no longer reliable.
By increasing production, they reduced the cost of production by an ever-decreasing amount. So if they had only had one more engine, the new engine would have cost them more, but they could make more product with it at a lower cost. However, by having to pay a higher cost for the same amount of production, they were more likely to lose money, which would have been great for them in a time when car accidents were becoming more frequent.
In the end, they had to increase the cost of production by an amount equal to the decrease in cost that occurred. So if the cost of production for the new engine came in at $100, and the cost of production for the old engine came in at $100, then they would have had to pay $100 more in total costs. Now, if they only had one more engine, then they would have had to lose $100, but they could have made $100 more in revenue.
if an increase in product demand occurs in a decreasing-cost industry, then we might have seen a bit of a decrease in profits, but it could very well have been a net gain for the firm. In fact, in the past, some firms, even in good times, would have seen a decrease in profits as their costs went down and they were forced to produce more. That, however, is not the case here.
There’s no evidence that this time-looping stealth game has an increase in product demand. It’s simply that the cost of the game has been decreasing while the revenue per unit has been increasing. Perhaps the game is now profitable, but it is probably not the case that it is now making as much money as it was before.
If the game is profitable, then it likely is making as much profit as before because the cost of the product has decreased. If the cost of the product has been decreasing, then it is not making as much as it was before but instead is producing as much as before.
That’s a good point. The fact is, in a changing-cost industry, the cost of goods will increase. The cost of the game has increased, but the revenue per unit has increased. In other words, the cost of producing the Game has increased, but the profit per unit has decreased.