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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

If supply is elastic, will shifts in demand have a larger effect on equilibrium quantity or on price?

To determine

Consider the supply as elastic, which one has large effect if demand shifts, on quantity or price?

Explanation

If the supply is elastic means the supply curve is horizontal in shape, parallel to x-axis. It means a small change in price can lead to infinite changes in quantity supplied. Consider the downward sloping demand curve which intersects the horizontal supply curve at point ‘E’. We can clearly see that, whether the demand curve shifts left or right, there will be a large impact on quantity and no impact on price level because the supply curve is elastic...

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