Suppose the demand curve for a product is represented by a typical downward-sloping curve.Now suppose the demand for this product increases.Which of the following statements accurately predicts the resulting increase in price?
A)The more elastic the supply curve, the greater the price increase.
B)The more elastic the supply curve, the smaller the price increase.
C)The increase in price is not affected by the elasticity of the supply curve.
D)There will be no increase in price if the supply curve is perfectly inelastic.

Question

Quizplus · Accepted Answer

If the demand for a product increases and the supply is elastic, producers are able to increase the quantity supplied without a radical increase in costs. As a result, the increase in price will be smaller. On the other hand, if the supply of the product is inelastic, producers cannot increase the quantity supplied without incurring significant additional costs. As a result, the price increase will be larger. In this scenario, the question assumes that supply is elastic, thus the correct prediction is that the more elastic the supply curve, the smaller the price increase.

Suppose the Demand Curve for a Product Is Represented by a Typical