posted by Shelle on .
Beachfront resorts have inelastic supply, and automobiles have an elastic supply. Suppose that a rise in population doubles the demand for both products (that is, the quantity demanded at each price is twice what it was).
a. What happens to the equilibrium price and quantity in each market?
b. Which product experiences a larger change in price?
c. Which product experiences a larger change in quantity?
d. What happens to total consumer spending on each product?
Draw standard supply and demand graphs for both markets. In the beachfront market, supply is inelastic; so make the supply curve nearly vertical. In the auto market, supply is elastic, so make the supply curve nearly horizontal. Now shift the demand curves in each market. You should have your answers.
which good is an inferior and which is a normal good