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Chapter 5: Q.15 (page 130)

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

Short Answer

Expert verified

The greater impact will be on equilibrium quantity.

Step by step solution

01

Step 1. Introduction:

Elastic demand curve denotes that quantity demanded correspond to price variation in a more than proportional way.

02

Step 2. Explanation:

Suppose there is a technological upgrade which causes the supply curve to move to the right. If the demand curve is elastic, then a higher quantity will be sold in the market but the price level will increase only slightly.

03

Step 3. Conclusion:

Thus, with elastic demand curve, a shift in the supply curve will have a greater impact on the equilibrium quantity.

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Most popular questions from this chapter

The ability of firms to enter and exit a market over time means that, in the long run,

a. the demand curve is more elastic.

b. the demand curve is less elastic.

c. the supply curve is more elastic.

d. the supply curve is less elastic.

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

The supply of paintings by Leonardo Da Vinci, who painted the Mona Lisa and The Last Supper and died in 1519, is highly inelastic. Sketch a supply and demand diagram, paying attention to the appropriate elasticities, to illustrate that demand for these paintings will determine the price.

Define the price elasticity of demand and the income elasticity of demand.

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