Elasticity End of Chapter Problem

Taiwan is a major world supplier of semiconductor chips. A recent earthquake severely damaged the production facilities of Taiwanese chip-producing companies, sharply reducing the number of chips they could produce. Assume that the total revenue of a chip manufacturer rises due to these events.

a.The accompanying graph depicts the market for Taiwanese semiconductor chips. Two points are highlighted on the demand curve. Given the information in the question, place point P1 at the initial price and quantity combination and point P2 at the price and quantity combination after the earthquake.

b. Place the "Price Effect" and "Quantity Effect" shaded areas to depict each.

\fc. In order for total revenue to increase as a result of this shift, the supply curve must have moved along the portion of the demand curve. inelastic unit-elastic elastic