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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 price and quantity increase proportionally.

Step by step solution

01

Step 1. Definition

Demand is said to be unitary elastic when a proportionate change in price causes equal proportionate change in quantity. In other words, quantity demanded by the same percentage amount as the price.

02

Step 2. Explanation

A constant unitary elastic curve implies that throughout the curve the price elasticity of supply is 1. A supply curve is an upward sloping cuurve and since price and quantity change by the same percentage amount, the supply curve would be a straight line.

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