Authors libby rittenberg 268

This is illustrated in Figure 5.10 "Increase in Apartment Rents Depends on
How Responsive Supply Is". Suppose the rent for a typical apartment had
been R0 and the quantity Q0 when the demand curve was D1 and the supply
curve was either S1 (a supply curve in which quantity supplied is less
responsive to price changes) or S2 (a supply curve in which quantity
supplied is more responsive to price changes). Note that with either supply
curve, equilibrium price and quantity are initially the same. Now suppose
that demand increases to D2, perhaps due to population growth. With
supply curve S1, the price (rent in this case) will rise to R1 and the quantity
of apartments will rise to Q1. If, however, the supply curve had been S2, the
rent would only have to rise to R2 to bring the market back to equilibrium.
In addition, the new equilibrium number of apartments would be higher
at Q2. Supply curve S2 shows greater responsiveness of quantity supplied
to price change than does supply curve S1.
Figure 5.10Increase in Apartment Rents Depends on How Responsive
Supply Is

Attributed to Libby Rittenberg and Timothy Tregarthen
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