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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 shift in supply curve will change the equilibrium quantity more than the price.

Step by step solution

01

Step 1. Definition

Elasticity is a microeconomic measure of the connection between changes in quantity demanded and pricing. It can be measured by percentage changes or by looking at revenue change.

02

Step 2. Explanation

When the demand curve is elastic it means it would be relatively flatter. The equilbrium quantity and price, as we know, is determined by interaction of demand and supply. With flatter curve, when supply shifts, a change in price would cause more than proportionate change in quantity. So, the larger effecct would be on equilibrium quantity.

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Most popular questions from this chapter

Describe the general appearance of a demand or a supply curve with infinite elasticity.

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?

Suppose you could buy shoes one at a time, rather

than in pairs. What do you predict the cross-price

elasticity for left shoes and right shoes would be?

The equation for a demand curve is P = 2/Q. What

is the elasticity of demand as price falls from 5 to 4?

What is the elasticity of demand as the price falls from 9

to 8? Would you expect these answers to be the same?

Would you usually expect elasticity of demand or supply to be higher in the short run or in the long run? Why?
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