Consider the short-run aggregate supply curve in the following graph.
a.Calculate approximately the elasticities of the curve at two price levels, P = 20 and P = 100. (Hint: The price elasticity formula is E_P = percentage change in Y / percentage change in P.)
b.Explain the meaning of the elasticity in the context of the AS curve.
c.Compare the two elasticities found in (a) and discuss the results. Does this comparison suggest certain policy implications?

Question

Consider the short-run aggregate supply curve in the following graph.

a.Calculate approximately the elasticities of the curve at two price levels, P = 20 and P = 100. (Hint: The price elasticity formula is E_P = percentage change in Y / percentage change in P.)
b.Explain the meaning of the elasticity in the context of the AS curve.
c.Compare the two elasticities found in (a) and discuss the results. Does this comparison suggest certain policy implications?

Quizplus · Accepted Answer

The Answer of Consider the short-run aggregate supply curve in the following graph. a.Calculate approximately the elasticities of the curve at two price levels, P = 20 and P = 100. (Hint: The price elasticity formula is E_P = percentage change in Y / percentage change in P.) b.Explain the meaning of the elasticity in the context of the AS curve. c.Compare the two elasticities found in (a) and discuss the results. Does this comparison suggest certain policy implications?

Consider the Short-Run Aggregate Supply Curve in the Following Graph