Hi Cramster Family & Friends: Beachfront resorts have an inelastic supply, and a

Question

Hi Cramster Family & Friends:

Beachfront resorts have an inelastic supply, and automobiles havean elastic supply. Suppose that a rise in population doubles thedemand for both products (that is, the quantity demanded at eachprice is twice what it was.) a) what happens to theequilibrium price and quantity in each market? b) which productexperiences a larger change in price? c) which product experiencesa larger change in quantity? d) what happens to total consumerspending on each product?

With sincerest appreciation, thank you.

Nettie

Explanation / Answer

(a) The increase in demand will increase both equilibrium price andquantity (b) In the beachfront resorts market which is a inelastic supply,the increase in demand leads to a relativley large increase inprice and less increase in quantity. (c)In the automobile market which is a elastic supply, the increasein demand leads to a relativley large increase in quantity and lessincrease in price. (d) Since both equilibrium price and quantity increase the consumerspending will increase.in both markets.

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---