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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

How is the price elasticity of supply calculated? Explain what it measures?

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

What do we call a good with an income elasticity less than zero?

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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