Question

Suppose that the supply for good X is everywhere unit elastic, and that the market for X is competitive.

The quantity supplied at a price of $10 and at a price of $100 are both positive.

A %10 increase in the price will

Answer 1

In a market with unit elastic supply, a 10% increase in price would result in a 10% increase in the quantity supplied of good X.

Step-by-step explanation:

A student asked about the effect of a 10% increase in the price on the quantity supplied of good X, given that the supply is unit elastic and the market is competitive. In economics, unit elasticity refers to a situation where the percentage change in quantity supplied is equal to the percentage change in price. This means that a 10% increase in price would lead to a 10% increase in quantity supplied. Therefore, if the price increases from $10 to $11 (a 10% increase), and the supply curve is unit elastic, the quantity supplied would increase by 10% as well. For example, if the quantity supplied at $10 was 80, a 10% increase would increase the quantity supplied to 88 (as in the given example).