Sunday, 24 May 2009

First Timer (Elastic supply)


The above shows elastic supply.

If the curve was steeper but still going through the vertical axis would it still be elastic?
If the curve was flatter but going through the horizontal axis would the curve be inelastic?

I confused with this question but this is my variant of answer:

As you can see if the curve was steeper but still going through the vertical axis it would still be elastic, because the small increase in the price level lead to big change in the quantity sold. The read shaded box is quantity lost if the price was at the point P1 at supply curve S1. 

In the same graph you can see second situation if the curve was flatter but going through the horizontal axis the curve would be inelastic, because the small change in the price level don’t lead to big change in the quantity sold. 


0 comments: