If the demand for some good fluctuates,but the supply curve is stable,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 unit elastic supply
C)small demand fluctuations and inelastic supply
D)small demand fluctuations and elastic 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 generally be the greatest. This is because with an elastic supply, producers are able to adjust their output in response to changes in demand. Therefore, as demand fluctuates, producers can increase or decrease their production to match the changes, resulting in larger quantity fluctuations. In contrast, when supply is inelastic, producers are unable to adjust their output easily, so the quantity fluctuations will be smaller. Small demand fluctuations and unit elastic supply could also result in large quantity fluctuations, but this is not as likely as in the case of large demand fluctuations and elastic supply.

If the Demand for Some Good Fluctuates,but the Supply Curve