question archive When supply changes, how does the elasticity of demand affect the resulting change in equilibrium price and quantity? Explain
When supply changes, how does the elasticity of demand affect the resulting change in equilibrium price and quantity? Explain
Subject:EconomicsPrice:2.88 Bought3
When supply changes, how does the elasticity of demand affect the resulting change in equilibrium price and quantity? Explain.
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
- Perfectly inelastic demand
When the demand is perfectly inelastic, an increase in supply decreases the equilibrium price and leaves the equilibrium quantity unchanged. A decrease in supply, on the other hand, increases the equilibrium price and leaves the equilibrium quantity unchanged.
- Perfectly inelastic demand
When the demand is perfectly elastic, an increase in supply increases the equilibrium quantity and leaves the equilibrium price unchanged. A decrease in supply, on the other hand, decreases the equilibrium quantity and leaves the equilibrium price unchanged.
- Relatively elastic demand
When the demand is relatively inelastic, an increase in supply decreases the equilibrium price and increases the equilibrium quantity, but the increased quantity is less than the decrease in the price. A decrease in supply, on the other hand, increases the equilibrium price and decreases the equilibrium quantity, but the decrease in the equilibrium quantity is less than the increase in the equilibrium price.
- Relatively elastic demand
When the demand is relatively elastic, an increase in supply decreases the equilibrium price and increases the equilibrium quantity, but the increase in the equilibrium quantity is more than the decrease in the equilibrium price. When there is a decrease in supply, the equilibrium price increases and the equilibrium quantity decreases. But the decrease in the equilibrium quantity is more than the increase in the price.f
