The market for electric drills in a certain country is characterized by a large number of buyers and sellers and every buyer who wants a drill and can afford one has bought one. In other words, the market for drills is in equilibrium.
a. Does this also mean that it is Pareto efficient? Explain your answer.
b. If some of the buyers in this market are now willing to pay more than they did earlier, would your answer change?
c. Compared to the market for cars, the market for vintage buttons has fewer buyers and sellers. Social surplus is likely to be higher in the market for cars than in the vintage button market. Is it then correct to assume that the outcome in the car market is Pareto efficient while in the vintage button market it is not? Explain.