2. Do you think a) the supply and b) the demand for sugar is price elastic...

2. Do you think a) the supply and b) the demand for sugar is price elastic or inelastic? Justify your choices and explain whether this means any given change in supply or demand will have a bigger effect on the equilibrium price of quantity.

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Expert Solution

The demand for certain goods are considered as inelastic if the quantity demanded doesn't change more by a change in the price. The supply of any good is considered inelastic of the supplier can't increase the production of that goods quickly with a change in the price of the good.

The demand and supply of Sugar are both elastic. The demand for sugar is elastic because any increase in the price of the sugar will not affect the demand for the sugar more. The supply of the sugar is inelastic because if the price of the sugar changed it will take the farmers and other producers almost a year to increase the production of the sugar.

If the demand for the sugar changed i.e. increased it will lead to a big change in the price of sugar because the supply can't fulfill the extra demand immediately. it will lead to a bigger effect on the equilibrium price.

Similarly, if the demand decreased it will take time to decrease the supply of sugar. Again it will decrease the equilibrium price by a huge amount. There will be a big impact on the price of sugar.

Rahul Sunny answered 1 year ago

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