Given a relatively, but not perfectly, price elastic supply curve, an increase in demand will certainly:
A)raise price but leave quantity sold unchanged.
B)raise price and increase quantity sold.
C)lower price, since supply cannot increase except through the inducement of higher price.
D)reduce quantity sold but leave price unchanged.
E)do none of the above, since "increase in demand" refers to a movement along a given demand curve.

Question

Quizplus · Accepted Answer

A relatively price elastic supply curve means that as price increases, the quantity supplied can increase but not at the same rate as the price increase. Therefore, when demand increases, the price will increase but the quantity supplied will also increase, although not at the same rate as the increase in demand. So, an increase in demand will raise the price and increase the quantity sold.

Given a Relatively, but Not Perfectly, Price Elastic Supply Curve