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Which combination of demand and supply curves would be appropriate for a firm attempting to increase its profits by increasing its market share?
A, Inelastic demand, inelastic supply
B, Elastic demand, elastic supply
C, Inelastic demand, elastic supply
D, Elastic demand, inelastic supply
– correct answer is B
– why is it “elastic supply”? I don’t understand the way to infer it?
thank youElastic demand means that a small proportional change in price causes a large proportional change in demand such that revenue will increase. The increase in demand from the price cut is consistent with increasing market share.
If profits are to increase the extra revenue must exceed the extra cost arising from buying more goods. If supply were inelastic then to get the extra goods a very high price would be needed. If the supply were elastic then a much higher price would have to be paid to acquire all the units needed and this might outweigh the extra revenue.
If supply is elastic the extra units can be bought with little price increase.
Hello sir!
This is my question.Which of the following would cause the supply curve for a good to shift to the right (outwards from the origin)?
1) A fall in the price of the good.
2) An increase in the demand for the good.
3) A fall in production costs of the good.
4) The imposition of a minimum. price
Answer is option 3 and other options are movement along the supply curve, please tell me how the other options are movement along the supply curve.
Please help me!!A supply curve plots supply volume against product price.
1 If the price falls, less will be supplied: the change is described by the supply curve
2 More demand will be met by price rises so that a encouraging a higher volume to be produced to meet the increased demand. Again just a different place on the price/volume curve.
4 Imposition of a minimum price will again simply change the quantity supplied if the equilibrium point was below that price.A fall in the production costs of a good will mean that the supplier will be able to make the same profit at a lower price or will be prepared to supply a higher volume at the same price: that is a rightwards shift in the supply curve.
Hello teacher!
Indicate which TWO of the following statements are correct.1) In a perfectly competitive market, the demand curve is horizontal
2) A change in the price of a product causes a shift along the demand curve
these two statements are true but I’m confuse in statement 2. Why a change in the product price causes a shift along demand curve ?
Please help me in this question.
Thank you
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