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A technological breakthrough shifts the supply curve to the right. What happens to the price of...

A technological breakthrough shifts the supply curve to the right. What happens to the price of the product to consumers when the price elasticity of demand is inelastic and elastic? Draw the graphs to represent both conditions. In which condition do consumers save more?

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Answer #1

When Demand is elastic.

Due to the shift of supply curve right the price fall less and quantity increases more in comparison to price.

When Demand is inelastic

Due to shift of supply curve right the price fall more and quantity increases less in comparison to price.

The consumer save more and get benefit more when demand is inelastic because shift in supply curve results in a much lower price for consumer. In other words we can say that when Demand curve is inelastic the price need to reduce more to increase the less quantity of goods. So finally consumer get benefit when Demand is inelastic.

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