Chapter 19

 

Suppose a developing country's export supply curve is relatively inelastic.

1.




Graph the following curves by clicking here

a.

Draw a downward-sloping demand curve, and an upward-sloping but relatively steep supply curve. Label these curves "D" and "S." Why might a developing country have an inelastic export supply curve?

b.

Now suppose demand for this product increases. Draw this shift on your graph, labeling the new demand curve "D".

c. Is the price increase resulting from the increase in demand larger or smaller than it would have been if supply had been more elastic?
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Now suppose a developing country's faces a relatively inelastic demand curve for its exports.
2.   Graph the following curves by clicking here
a. Draw an upward-sloping supply curve and a downward-sloping but very steep demand curve. Why might a developing country face an inelastic demand curve for its exports?
b.

Now suppose supply for this product decreases. Draw this shift on your graph, labeling the new supply curve "S".

c. Is the price increase resulting from the increase in supply larger or smaller than it would have been if demand had been more elastic?

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