2. These are good connective phrases
by contrast…
A consequence of
this might be …
therefore…
this might
mean…
on the other
hand…this is because
3. Diagrams matter!
Diagram must haves
Fully labeled
Original and new equilibrium
Demand and supply the correct way round
Well explained – you must explain why the
curve has shifted, in detail
Think about the elasticity – e.g. oil has
inelastic demand and supply
5. The market for tractors is supplied by two firms, X and Y,
each initially having 50 % of the market.
A 10 % increase in the price of tractors leads to an increase
in output from firm X of 10 % and from firm Y of 20 %. What
is the price elasticity of supply of tractors in this market?
Price elasticity of supply
6. The market for tractors is supplied by two firms, X and Y,
each initially having 50 % of the market.
A 10 % increase in the price of tractors leads to an increase
in output from firm X of 10 % and from firm Y of 20 %. What
is the price elasticity of supply of tractors in this market?
Price change = 10%, total output change is 15%
Therefore the price elasticity of supply = +1.5
Price elasticity of supply
8. When demand for a good increases, equilibrium price
stays the same. What is the elasticity of supply?
Sketch this situation in the supply and demand diagram
on the left (below)
Price
Quantity
Price
Quantity
D1 D2
9. When demand for a good increases, equilibrium price
stays the same. What is the elasticity of supply?
Sketch this situation in the supply and demand diagram
on the left (below)
Price
Quantity
Price
Quantity
D1 D2
S1P1
10. When there is an increase in demand for a product, the
rise in equilibrium price is large but the expansion in
quantity produced is small. What is the elasticity of
supply? Sketch the situation in the supply and demand
diagram on the right (below)
Price
Quantity
Price
Quantity
D1 D2
S1P1
D1 D2
11. When there is an increase in demand for a product, the
rise in equilibrium price is large but the expansion in
quantity produced is small. What is the elasticity of
supply? Sketch the situation in the supply and demand
diagram on the right (below)
Price
Quantity
Price
Quantity
D1 D2
S1P1
D1 D2
S1
12. When there is an increase in demand for a product, the
rise in equilibrium price is large but the expansion in
quantity produced is small. What is the elasticity of
supply? Sketch the situation in the supply and demand
diagram on the right (below)
Price
Quantity
Price
Quantity
D1 D2
S1P1
D1 D2
S1
P1
Q1
13. When there is an increase in demand for a product, the
rise in equilibrium price is large but the expansion in
quantity produced is small. What is the elasticity of
supply? Sketch the situation in the supply and demand
diagram on the right (below)
Price
Quantity
Price
Quantity
D1 D2
S1P1
D1 D2
S1
P1
P2
Q1 Q2
14. Give three reasons why an industry’s supply
curve might be price elastic in the short term
Spare
capacity
High stock
levels
Short
production
times