A leftward shift in the supply curve of product X will increase equilibrium price to a greater extent the A

Economics Dec 08, 2020

A leftward shift in the supply curve of product X will increase equilibrium price to a greater extent the

A. larger the elasticity of demand coefficient.

B. more inelastic the demand for the product.

C. more elastic the supply curve.

D.more elastic the demand for the product.

Expert Solution

The correct answer is: B. more inelastic the demand for the product.

With an inelastic demand curve, a decrease in supply (which is a leftward shift in the supply curve) causes a decrease in the equilibrium quantity, and an increase in the equilibrium price. But the increase in the equilibrium price is greater than the decrease in the equilibrium quantity.

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