Question

Explain graphically the following:

Relatively Elastic Supply

Answer 1

The graph represents relatively elastic supply (E_s > 1), meaning a small change in price leads to a large change in quantity supplied. The supply curve is flatter, indicating that sellers can easily adjust supply in response to price changes. In the graph, when price rises from P to P₁, the quantity supplied increases by a larger amount from Q to Q₁ (AQ > AP).