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Chapter 5: Q.4 (page 129)

Why is the supply curve with constant unitary elasticity a straight line?

Short Answer

Expert verified

Because the curve is inclined upwards, and both price and quantity are rising in lockstep

Step by step solution

01

Definition

A supply curve graphically illustrates the relationship between price of product and quantity supplied. It indicates quantity supplied of products and at different price levels.

02

Explanation

Unitary elasticity is the link between a percentage change in price and an equivalent percentage change in quantity sought or delivered. Because the curve slopes higher and both price and quantity climb in lockstep, the constant unitary elasticity is a straight line.

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Most popular questions from this chapter

Assume that the supply of low-skilled workers is fairly elastic, but the employers’ demand for such workers is fairly inelastic. If the policy goal is to expand employment for low-skilled workers, is it better to focus on policy tools to shift the supply of unskilled labor or on tools to shift the demand for unskilled labor? What if the policy goal is to raise wages for this group? Explain your answers with supply and demand diagrams.

If demand is inelastic, will shifts in supply have a larger effect on equilibrium price or on quantity?

Why is the demand curve with constant unitary elasticity concave?

The federal government decides to require that automobile manufacturers install new anti-pollution equipment that costs $2,000 per car. Under what conditions can carmakers pass almost all of this cost along to car buyers? Under what conditions can carmakers pass very little of this cost along to car buyers?

The equation for a supply curve is 4P = Q. What is the elasticity of supply as price rises from 3 to 4? What is the elasticity of supply as the price rises from 7 to 8? Would you expect these answers to be the same?
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