Question

Examine the chart below, which compares the prices of three different items to the quantities supplied at each price:

Name and define the economic concept being illustrated. Then analyze the chart’s information, and state which item is a) elastic; b) inelastic, or; c) unit elastic, and tell why.

Answer 1

a) Item #1

b) Item #3

c) Item #2

Step-by-step explanation:

From the given chart, we have;

Item #1 is elastic

The percentage change in price results in a larger percentage change in quantity supplied as follows;

The percentage change in price from $1.00 to $2.00 is 100% change (increase) while the corresponding percentage change for the quantity supplied from 10 to 25 in 150% change (increase)

Therefore, a percentage change in price results in a higher percentage change in quantity supplied, and the supply is said to be elastic (
`E_S > 1`)

Item #2 is Unit elastic

The percentage change in price results in an equal percentage change in quantity supplied and the supply is therefore unit elastic

The percentage change in price from $1.00 to $2.00 is 100% change (increase) while the corresponding percentage change for the quantity supplied from 10 to 20 in 100% change (increase)

Therefore, a percentage change in price results in an equal percentage change in quantity supplied, and the supply is said to be unit elastic (
`E_S = 1`)

Item #3 is inelastic

The percentage change in price results in an lesser percentage change in quantity supplied and the supply is therefore inelastic

The percentage change in price from $1.00 to $2.00 is 100% change (increase) while the corresponding percentage change for the quantity supplied from 10 to 15 in 50% change (increase)

Therefore, a percentage change in price results in an lesser percentage change in quantity supplied, and the supply is said to be inelastic (
`E_S < 1`).