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Chapter 5: Q.4 (page 129)

Why is the supply curve with constant unitary elasticity a straight line?

Short Answer

Expert verified

The supply curve with constant unitary elasticity is a straight line because there is a proportional increase in price and quantity.

Step by step solution

01

Step 1. Introduction:

A condition in which a price shift of one percent leads in a quantity change of one percent is known as constant unitary elasticity in either a supply or demand curve. A straight line represents the supply curve with unitary elasticity, and that line passes through the origin. There is an equivalent differential in quantity among each pair of supply curve nodes.

02

Step 2. Explanation:

The % output rises on the horizontal axis exactly match the percentage rising prices on the vertical axis along the constant unitary elasticity supply curve, indicating that this supply curve has constant unitary elasticity at all places. Because the curve slopes higher and both prices and outputs rise correspondingly, the constant unitary elasticity is a straight line.

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Most popular questions from this chapter

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

If the elasticity is greater than one, is demand elastic or inelastic? If the elasticity equals zero, is demand perfectly elastic or perfectly inelastic?

Define the price elasticity of demand and the income elasticity of demand.

The price of a good rises from \(16 to \)24, and the quantity supplied rises from 90 to 110 units. Calculated with the midpoint method, the price elasticity of supply is

a. 1/5.

b. 1/2.

c. 2.

d. 5.

Suppose that business travellers and vacationers have the following demand for airline tickets from Chicago to Miami:

Price

Quantity Demanded (business travellers)

Quantity Demanded (vacationers)

\(150

2,100 tickets

1,000 tickets

200

2,000

800

250

1,900

600

300

1,800

400

  1. As the price of tickets rises from \)200 to $250, what is the price elasticity of demand for (i) business travellers and (ii) vacationers? (Use the midpoint method in your calculations.)
  2. Why might vacationers have a different elasticity from business travellers?
See all solutions

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