Question

Can anyone answer this micro econ question?

If the demand for a good is elastic and supply increases in the market,

a. the equilibrium price will increase by less than the equilibrium quantity decreases

b. the equilibrium price will decrease by less than the equilibrium quantity increases.

c. the equilibrium price will decrease by more than the equilibrium quantity increases.

d. the equilibrium price will increase by more than the equilibrium quantity decreases.

Answer 1

Ans: b) the equilibrium price will decrease by less than the equilibrium quantity increases.

Explanation:

If the demand for a good is elastic then the demand curve will be more flatter in shape. An small decrease in price leads more demand for the good. When supply increases , then the supply curve will shift to the right. It leads more supply of the good in the market. As a result equilibrium price will decrease whereas the equilibrium quantity will increase. But  the equilibrium price will decrease by less than the equilibrium quantity increases.