For both supply and demand, the effect of a price change is far greater when demand is elastic than when it is inelastic. What does this tell us about market adjustments?

   We know that an increase in supply will lead to a reduction in equilibrium price and an increase in equilibrium quantity. Likewise, a reduction in supply will cause equilibrium price to rise and quantity to fall.

   If we know the elasticity of the demand curve, it turns out that we can say whether the supply shift will have a larger impact on price or quantity.

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