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Chapter 5: Q. 18 (page 130)

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

Short Answer

Expert verified

The greater impact will be on equilibrium price.

Step by step solution

01

Step 1. Introduction

A supply curve that is inelastic is one in which a considerable percentage variation in price results in a lower percentage variation in quantity provided.

02

Step 2. Explanation

Suppose the supply curve is inelastic. The demand for the commodity has increased in the market which causes the demand curve to shift to the right. This will lead to higher prices for the commodity but the equilbrium quantity would change will less intensity as supply is inelastic. Thus, the equilbrium price would be more affected.

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