question archive Beachfront resorts have inelastic supply, and automobiles have an elastic supply
Beachfront resorts have inelastic supply, and automobiles have an elastic supply
Subject:EconomicsPrice:2.88 Bought3
Beachfront resorts have inelastic supply, and automobiles have an elastic supply. Suppose that a rise in population doubles the demand for both products (that is, the quantity demanded at each price is twice what it was).
a. What happens to the equilibrium price and quantity, in each market?
b. Which product experiences a larger change in price?
c. Which product experiences a larger change in quantity?
d. What happens to total consumer spending, on each product?
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a. When the population doubles the demand for both products, the equilibrium price and quantity both increase.
b. The supply of beachfront resorts is inelastic, and the supply of automobiles is elastic. Therefore, the changes in the prices are more in the beach resort market. It is so because the increase in demand cannot be compensated by an increase in supply.
c. The supply of the automobiles is elastic. Therefore, it experiences a greater change in the quantity supplied.
d. Consumer surplus in both the market increases.
