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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

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

31. Economists define normal goods as having a positive income elasticity. We can divide normal goods into two types: Those whose income elasticity is less than one and those whose income elasticity is greater than one. Think about products that would fall into each category. Can you come up with a name for each category?

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

Suppose the cross-price elasticity of apples with respect to the price of oranges is 0.4, and the price of oranges falls by 3%. What will happen to the demand for apples?

In competitive markets, farmers adopt new technologies that will eventually reduce their revenue because

a. each farmer is a price taker.

b. farmers are short-sighted.

c. regulation requires the use of best practices.

d. consumers pressure farmers to lower prices.
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