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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 formula for calculating elasticity?

Would you expect supply to play a more significant

role in determining the price of a basic necessity like

food or a luxury like perfume? Explain. Hint: Think

about how the price elasticity of demand will differ

between necessities and luxuries.

What is the formula for the cross-price elasticity of demand?

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

In a market where the supply curve is perfectly

inelastic, how does an excise tax affect the price paid by

consumers and the quantity bought and sold?
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