Demand Shift - Two Supply Curves    When supply shifts in either direction, the price effect is greater the more inelastic demand; the quantity effect is greater the more elastic demand.

   The same relationship holds for shifts in demand, as we see in the graph to the right. The more elastic supply, the greater the impact a demand shift will have on equilibrium quantity; the more inelastic supply, the greater the impact a demand shift will have on price.

   This exact same reasoning can tell us a bit about the difference between short-run and long-run market adjustments.

Copyright © 1995-2004 OnLineTexts.com, Inc. - All Rights Reserved