Sia
Question
Microeconomics
Posted 9 months ago
Under what conditions will total economic surplus change the most in a market as a result of a change in demand?
Choose 1 answer:
A) When supply is very elastic and demand is very elastic
(B) When supply is very elastic and demand is very inelastic.
(C) When supply is very inelastic and demand is very elastic.
(D) When supply is very inelastic and demand is very inelastic
(E) When supply is perfectly inelastic and demand is elastic
Sign in to unlock the answer
Answer from Sia
Posted 9 months ago
Solution
a
Definition of Elasticity: Elasticity measures how much the quantity demanded or supplied responds to changes in price
b
Total Economic Surplus: Total economic surplus is the sum of consumer surplus and producer surplus. It changes when there is a shift in demand or supply
c
Impact of Elasticity on Surplus: When both supply and demand are elastic, a change in demand will cause a significant change in quantity, leading to a larger change in total economic surplus
d
Scenario Analysis:
- When supply is very elastic and demand is very elastic, both consumers and producers can easily adjust to price changes, leading to a significant change in total economic surplus.
- When supply is very elastic and demand is very inelastic, the change in quantity will be less significant, leading to a smaller change in total economic surplus.
- When supply is very inelastic and demand is very elastic, the change in quantity will be more significant, but not as much as when both are elastic.
- When both supply and demand are very inelastic, the change in quantity will be minimal, leading to the smallest change in total economic surplus.
- When supply is perfectly inelastic and demand is elastic, the change in quantity will be constrained by the inelastic supply, leading to a moderate change in total economic surplus
Answer
A) When supply is very elastic and demand is very elastic
Key Concept
Elasticity of supply and demand
Explanation
When both supply and demand are very elastic, a change in demand will lead to a significant change in quantity, resulting in the most substantial change in total economic surplus.
Not the question you are looking for? Ask here!
Enter question by text
Enter question by image
Unlock Smarter Learning with AskSia Super!
Join Super, our all-in-one AI solution that can greatly improve your learning efficiency.
30% higher accuracy than GPT-4o
Entire learning journey support
The most student-friendly features
Study Other Question