If the demand for good A is more elastic than the demand for good B,a small increase in supply in both markets will cause
A)a much greater increase in the equilibrium quantity of good A than for good B
B)a much greater increase in the equilibrium quantity of good B than for good A
C)the equilibrium quantity will decrease by the same amount in both markets
D)only the equilibrium quantity of good B will decrease
E)only the equilibrium quantity of good A will decrease

Question

Quizplus · Accepted Answer

When the demand for good A is more elastic than the demand for good B, it means that consumers are more responsive to changes in price for good A than for good B. Therefore, if there is a small increase in supply in both markets, the price of both goods will decrease, but the increase in the equilibrium quantity of good A will be greater than for good B because consumers are more responsive to changes in the price of good A.

If the Demand for Good a Is More Elastic Than