Economics Consumer Surplus And Producer Surplus Questions
Inelastic supply refers to a situation where the quantity supplied of a good or service does not significantly change in response to changes in price. This means that even if the price of the good or service increases or decreases, the quantity supplied remains relatively constant. Inelastic supply is often observed in industries where it is difficult or costly to increase production in a short period of time, such as in the case of limited resources or specialized equipment.
On the other hand, elastic demand refers to a situation where the quantity demanded of a good or service is highly responsive to changes in price. This means that if the price of the good or service increases, the quantity demanded decreases significantly, and vice versa. Elastic demand is often observed in industries where there are many substitutes available, consumers have a high level of income, and the good or service is not a necessity.
Overall, the concept of inelastic supply and elastic demand highlights the different degrees of responsiveness of quantity supplied and quantity demanded to changes in price.