Computers have an inelastic demand,and concerts have an elastic demand.Suppose
that a rise in suppliers doubles the supply of both products.
A. whta happens to the equilibrium price and quantity in each market?
B. which product experiences a larger change in price?which product experiences a
larger change in quantity?
C. what happens to total consumer spending on each product?
- 1 decade agoFavorite Answer
A. for the computer market, since demand is relatively inelastic, a increase in supply would not lead to a corresponding increase in demand and therefore equilibrium price would drop and quantity demanded may increase less then proportionate to the increase in supply.
for the concerts market, a increase in supply , assuming demand remain constant, would lead to a decrease in equilibrium price. This decrease in price would lead to a more then proportionate increase in demand.
b. computers would experience a larger change in price while concerts would experience a larger change in quantity
c. total consumer spending should go up for concerts since decrease in price led to a more then proportionate increase in quantity demanded and therefore total revenue increase. Total consumer spending for computers decrease since demand is relatively inelastic, the increase in total revenue would not be enough to offset the decrease in reveue given the lower price.Source(s): myself
- 漂泊異鄉人Lv 71 decade ago