In output markets, the elasticity of supply tends to be \'positive\'.Is it becau

Question

In output markets, the elasticity of supply tends to be 'positive'.Is it
because supply curve is positive? then the elasticity of demandtends to
be negative by same logic?

Explanation / Answer

Essentially yes - just think back to the slopes of those twocurves. D is downward sloping, and thus the slope is always negative(Law of Demand tells us that as price goes up => quantitydemanded goes down, and this is a negative or inverserelationship). S is upward sloping, and thus the slope is always positive(Law of Supply tells us that as prices goes up => quantitysupplied goes UP, and this is a positive relationship). So, when finding elasticities (elasticity is basically an index ofhow responsive the change in quantity [demanded or supplied] withrespect to the change in price), so, intuitively the change inprice with respect to quantity demanded is always negative and withrespect to quantity supplied it is positive. You essentially answered your own question, but after a littleelaboration and if you look at the formulas for slope andelasticity I think you'll see why this is both conceptually andmechanically. However, when doing elasticities, in the end you usually take theabsolute value just to get the level of responsiveness, and therelationships are usually assumed when analyzing those numbers.

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.