If the demand for some good fluctuates, but supply is constant, then which of the following combinations would generally yield the greatest quantity fluctuations?
A) large demand fluctuations and inelastic supply
B) small demand fluctuations and elastic supply
C) small demand fluctuations and unit elastic supply
D) small demand fluctuations and inelastic supply
E) large demand fluctuations and elastic supply

Question

Quizplus · Accepted Answer

When there are large demand fluctuations and elastic supply, the quantity fluctuations will be the greatest. This is because when demand increases, suppliers are able to increase production easily, resulting in a larger increase in quantity. Similarly, when demand decreases, suppliers can quickly decrease production, resulting in a larger decrease in quantity.

If the Demand for Some Good Fluctuates, but Supply Is