question archive Explain how to draw a demand curve for a free good where the demand increases yet the supply remains inelastic
Subject:EconomicsPrice:2.88 Bought3
Explain how to draw a demand curve for a free good where the demand increases yet the supply remains inelastic.
Supply Portion:
If supply is inelastic and because there is a limited amount of it, the supply curve would simply be a vertical line with a constant quantity supplied.
Demand Portion:
The demand curve is normal in that is will be downward sloping. This is because consumers would be willing to pay for the free good and thus have a positive willingness to pay but do not have to. The market is at equilibrium where the demand curve meets supply but there might be a shortage in this case if supply is limited and the market can't solve this unless prices rise.