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Microeconomics: Principles & Policy

14th Edition
William J. Baumol + 2 others
Publisher: Cengage Learning
ISBN: 9781337794992

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BuyFindarrow_forward

Microeconomics: Principles & Policy

14th Edition
William J. Baumol + 2 others
Publisher: Cengage Learning
ISBN: 9781337794992
Chapter 4, Problem 6DQ
Textbook Problem
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The same rightward shift of the demand curve may produce a very small or a very large increase in quantity, depending on the slope of the supply curve. Explain this conclusion with diagrams.

To determine

To analyze the effects of a change in quantity due to a rightward shift in the demand curve and extent of that change considering the slope of the supply curve.

Explanation of Solution

Due to some favorable change, some factor other than the price of commodity demand curve shifts rightward.

For example, due to favorable change in preference of consumer for a commodity, the demand curve of the commodity shifts rightward and quantity demanded increases.

The change in quantity can be very large or small depending upon the slope of the supply curve as discussed below.

When the slope of the supply curve is higher, the supply curve is inelastic in nature and the change in quantity is small as shown below:

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