Question

Explain graphically the following:

Unitary Elastic Supply

Answer 1

The given graph shows unitary elastic supply (E_s = 1), where the percentage change in price is exactly equal to the percentage change in quantity supplied. The supply curve (SS) is a straight upward-sloping line, indicating a constant relationship between price and quantity supplied.

In the graph, when price rises from P to P₁, the quantity supplied increases proportionately from Q to Q₁, showing that producers adjust supply in direct proportion to price changes.