Why does consumer surplus and producer surplus decrease when the elasticity of demand and elasticity of supply increase.
The explanation given in the CFA text is that when the elsticity of demand and supply increases, the demand and supply curves becone more horizontal and the space between the curves to the left of the equilibrium quantity will become smaller.
I still don't get the logic behind. Can someone explain?作者: draz 时间: 2011-7-11 18:32
Hi movingonup
Thanks a lot! it did help me..will try & memorize the graph ASAP.
