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Elastic and inelastic price - Assignment Example

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This particular paper discusses the impact of a change in supply on two products whose price elasticity of demand is elastic for the first product and inelastic for the second. If the demand curve is elastic the resulting change in the amount of the product supplied will be…

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Subject: Macro & Microeconomics
Type: Assignment
Level: College
Pages: 1 (250 words)
Downloads: 2
Author: donna36

Extract of sample "Elastic and inelastic price"

The price elasti of supply is obtained by dividing the percentage change in the amount of the product supplied by the percentage change in the products` price.This particular paper discusses the impact of a change in supply on two products whose price elasticity of demand is elastic for the first product and inelastic for the second. If the demand curve is elastic the resulting change in the amount of the product supplied will be larger than the price change. If the demand curve is inelastic, the change in the amount of product supplied will be smaller compared to the change in the price (Boyes and Melvin, 2012).

Diagram ADiagram B(Boyes and Melvin, 2012)Diagram A represents a product with an elastic demand curve while diagram B represents a product with an inelastic demand curve. The change in the price of diagram A is P2-P1 and the change in the quantity is Q2-Q1. The change in the amount of the product supplied is greater than the change in the price (Q2-Q1) (P2-P1). The change in the price of diagram B is Pb2-Pb1 while its change in the quantity is Qb2-Qb1. The change in the quantity supplied is smaller than the change in the price (Qb2-Qb1) (Pb2-Pb1).

If the two diagrams are compared, the change in price of diagram A is less than the change in price of diagram B (P2-P1) (Pb2-Pb1). The change in the amount of product supplied in diagram A is greater than that of diagram B (Q2-Q1) (Qb2-Qb1).ReferenceBoyes, W. and Melvin, M. (2012). Microeconomics, New York: Cengage Learning.

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