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Chapter 5: Q. 17 (page 130)

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

Short Answer

Expert verified

The larger effect will be on equilibrium quantity.

Step by step solution

01

Step 1. Introduction

Elastic supply curves show that the quantity supplied varies more than proportionally in response to price variations.

02

Step 2. Explanation

The form of the supply curve determines if a movement in the demand curve leads to a higher corresponding difference in the equilibrium price or the equilibrium quantity. The shift will be predominantly in the equilibrium quantity if the supply curve is relatively flat or elastic. A supply curve that is elastic implies that a minor adjustment in price usually leads to a larger reaction in the quantity given.

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Most popular questions from this chapter

What is the relationship between price elasticity

and position on the demand curve? For example, as you

move up the demand curve to higher prices and lower

quantities, what happens to the measured elasticity?

How would you explain that?

Why is the demand curve with constant unitary elasticity concave?

Can you think of an industry (or product) with

near infinite elasticity of supply in the short term? That

is, what is an industry that could increase Qs almost

without limit in response to an increase in the price?

From the data in Table 5.5 about demand for smart phones, calculate the price elasticity of demand from: point B to point C, point D to point E, and point G to point H. Classify the elasticity at each point as elastic, inelastic, or unit elastic.

PointsPQ
A603,000
B702,800
C802,600
D902,400
E1002,200
F1102,000
G1201,800
H1301,600

Table 5.5

What is the price elasticity of demand? Can you explain it in your own words?
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