Question

In: Economics

The following graph displays four supply curves (HH, II, JJ, and KK) that intersect at point A.


The variety of supply curves 

The following graph displays four supply curves (HH, II, JJ, and KK) that intersect at point A.

image.png

Using the graph, complete the table that follows by indicating whether each statement is true or false. 

Statement   True False

Between points A and B, curve II is perfectly inelastic. 

Curve KK is more elastic between points A and C than curve JJ is between points A and D. 

Between points A and D, curve JJ is inelastic.

Solutions

Expert Solution

Elasticity = %change in quantity/ % change in price = (dQ/dP) * (P/Q)

If the absolute value of elasticity is more than 1 then the demand is elastic and if it is less than 1 then it is inelastic demand.

1) For curve II the value of price changes by some percentage points between A and B but there is no change in quantity demanded. This means quantity is not at all responsive to the price and the price elasticity of demand is 0, which is perfectly inelastic demand. Hence the given statement is true.

2) At point A, P =200 and Q = 200

For curve KK, elasticity between A and C = (dQ/dP) * (P/Q) = (1/slope of KK) * (200/200)

= 1/slope of KK

For curve JJ, elasticity between A and D = (dQ/dP) * (P/Q) = (1/slope of JJ) * (200/200)

= 1/slope of JJ

Now remember that steeper lines have higher slopes. From the diagram it can be clearly seen that beyond A , KK is steeper than JJ. This means the slope of KK> slope of JJ

From this analysis it becomes clear that 1/slope of KK< 1/slope of JJ

This means that the elasticity for curve KK between A and C < elasticity for curve JJ elasticity between A and D

Hence the given statement is false as curve KK is less elastic between A and C than curve JJ is between A and D

c) At point A, P =200 and Q = 200

For curve JJ, elasticity between A and D = (dQ/dP) * (P/Q) = (1/slope of JJ) * (200/200)

= 1/slope of JJ

Now since JJ lies below the 45 degree line it means that its slope must be less than 1.

Elasticity = 1/slope of JJ

Since the slope is less than 1 the value of elasticity will necesssarily be more than 1. This means the curve JJ is elastic between A and D

Hence, the given statement is false.

If this answer has been helpful then please give an upvote

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

The following graph displays four demand curves (LL, MM, NN, and OO) that intersect at point A.
5. The variety of demand curvesThe following graph displays four demand curves (LL, MM, NN, and OO) that intersect at point A.Using the graph, complete the table that follows by indicating whether each statement is true or false. Between points A and E, curve 00 is perfectly inelastic. Curve MM is less elastic between points A and C than curve NN is between points A and D. Between points A and D, curve NN is elastic.
f the supply and demand curves intersect at a price of $7, then any price above...
f the supply and demand curves intersect at a price of $7, then any price above that would result in: A) equilibrium B) an increase in demand C) a surplus. D) a shortage. Suppose due to a faster than usual decrease in population, there is an excess supply for water in Manitoba. This means that we can expect the price of water to increase in Manitoba over time. Question 39 options: A) True B) False
16. In pure competition, price is determined where the market A. Demand and supply curves intersect...
16. In pure competition, price is determined where the market A. Demand and supply curves intersect B. Total cost is less than total revenue. C. Average total cost equals total variable cost. D. Demand intersects the individual firm's marginal cost curve. 20.  Long-run competitive equilibrium A. Is realized only in constant-cost industries. B. Is not economically efficient C. Will never change once it is realized D. Results in zero economic profit. 21. Marginal product is A. The change in total revenue...
Use the following information to draw aggregate demand (AD) and aggregate supply (AS) curves on the following graph.
Use the following information to draw aggregate demand (AD) and aggregate supply (AS) curves on the following graph. a. What is the equilibrium price level? b. What curve would have shifted if a new equilibrium were to occur at an output level of 450 and a price level of $450?  AD shifts to the right  AD shifts to the left  AS shifts to the right  AS shifts to the left c. What curve would have shifted if a new equilibrium were to occur at an output level...
Draw and upload a graph with supply and demand curves, and a written explanation, explaining the...
Draw and upload a graph with supply and demand curves, and a written explanation, explaining the impact of a minimum wage.
Graph and shift the market or individual demand or supply curves accordingly. a) In the market...
Graph and shift the market or individual demand or supply curves accordingly. a) In the market for gasoline, the price of powerboats falls drastically. b) In the market for pomegranates, the government releases a study revealing that eating pomegranates reduce cancer risk. c) Jane likes butter or cream cheese on her bagels, and the price of butter rises. What happens to her demand curve for cream cheese and her demand curve for butter? d) In the market for salmon, the...
Draw a hypothetical demand and supply curves for egg cups in Canada, and then graph and...
Draw a hypothetical demand and supply curves for egg cups in Canada, and then graph and explain the following events and how they affect the equilibrium price and quantity of egg cups in Canada. A successful advertising campaign by egg cup producers. Technological improvements in the production of egg cups. An increase in the price of eggs a compliment in consumption. An increase in the price of bird feed the main input in egg production. An increase in the demand...
Sketch example stress strain curves for the following material properties (2 curves on each graph): Graph...
Sketch example stress strain curves for the following material properties (2 curves on each graph): Graph 1: Brittle and Ductile Graph 2: strong and weak (relative) Graph 3: Non-linear and linear material
1. Sketch a graph of the market for peanut butter, labeling the supply and demand curves,...
1. Sketch a graph of the market for peanut butter, labeling the supply and demand curves, both axes, and the equilibrium price and equilibrium quantity. Now, a per-unit tax is imposed on sellers in this market. SHOW and describe what happens in this market. Draw and label any curve shifting and any change in the equilibrium price or equilibrium quantity. What is the new price that buyers pay for peanut butter? What is the price that sellers get to keep...
on a graph, draw the supply and demand curves for juul pods, labeling the equilibrium price...
on a graph, draw the supply and demand curves for juul pods, labeling the equilibrium price and quantity(1 point). Now suppose the government imposes a per unit tax to be paid by sellers. on the same graph, show how this affects the supply and or demand curves and show the new equilibrium price and quantity ( 2 points ). label the price suppliers recieve, the price buyers pay, and the tax ( 2 points). label the areas of consumer surplus,...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT