Final answer:
Shifts in demand will have a larger effect on equilibrium price when supply is inelastic.
Step-by-step explanation:
An increase in both equilibrium price and quantity exchanged is consistent with: c) Elastic supply. Elasticity measures the responsiveness of quantity demanded or supplied to changes in price. In this context, an increase in both equilibrium price and quantity exchanged suggests that the supply is elastic. In elastic supply, producers are highly responsive to changes in price. When the price increases, suppliers are willing and able to increase the quantity they supply to the market. This results in a simultaneous rise in both price and quantity exchanged. Elasticity is often influenced by factors such as the availability of resources, production technology, and the ease with which producers can adjust their output. Conversely, inelastic supply would mean that producers are less responsive to changes in price, resulting in a situation where an increase in price might not be met with a proportionate increase in the quantity supplied. Elasticity concepts play a crucial role in understanding market dynamics, pricing strategies, and the behavior of both consumers and producers in response to changes in economic conditions.