Take a linear demand curve like the one discussed in class, where the range of prices for which demand is elastic and inelastic is labeled. In each of the following scenarios, the supply curve shifts. Show (with the help of a neatly labeled graph) along which portion of the demand curve (that is, the elastic or the inelastic portion) the supply curve must have shifted in order to generate the event described. In each case, show on the graph the quantity effect and the price effect. A fall in input prices has led to higher output of Tata Nano cars produced by Tata Motors. But the total revenue for the company has declined as a result. New construction increased the number of seats in the cricket stadium and resulted in greater total revenue from box-office ticket sales (reflect when you draw the supply curve).
Take a linear demand curve like the one discussed in class, where the range of prices for which demand is elastic and inelastic is labeled. In each of the following scenarios, the supply curve shifts. Show (with the help of a neatly labeled graph) along which portion of the demand curve (that is, the elastic or the inelastic portion) the supply curve must have shifted in order to generate the event described. In each case, show on the graph the quantity effect and the price effect. A fall in input prices has led to higher output of Tata Nano cars produced by Tata Motors. But the total revenue for the company has declined as a result. New construction increased the number of seats in the cricket stadium and resulted in greater total revenue from box-office ticket sales (reflect when you draw the supply curve).
Chapter5: Elasticity Of Demand And Supply
Section: Chapter Questions
Problem 1.1P: (Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of...
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Take a linear demand curve like the one discussed in class, where the range of prices for which demand is elastic and inelastic is labeled. In each of the following scenarios, the supply curve shifts. Show (with the help of a neatly labeled graph) along which portion of the demand curve (that is, the elastic or the inelastic portion) the supply curve must have shifted in order to generate the event described. In each case, show on the graph the quantity effect and the price effect.
- A fall in input prices has led to higher output of Tata Nano cars produced by Tata Motors. But the total revenue for the company has declined as a result.
- New construction increased the number of seats in the cricket stadium and resulted in greater total revenue from box-office ticket sales (reflect when you draw the supply curve).
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