Problem
Most PCs sold to households now come equipped with DVD players. When DVD players were first introduced several years ago, they were very expensive, so the supply of PCs with DVD players was very inelastic. Now that the cost of DVD players has fallen significantly, supply is much more elastic. Draw and label a supply curve for DVD equipped PCs that is relatively insensitive to changes in price. Identify an initial price as P, and the quantity that would be supplied at this price as Q. Identify a higher price as P1 and show the quantity that would be supplied as Q1. Illustrate the effect of an increase in the elasticity of supply by drawing in a new supply curve, S1, that passes through P but is more elastic than S. Show the quantity that would be offered for sale along this supply curve if the price were to rise to P1. Label this as Q2.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.