This exercise shows how the relative price elasticities of demand and supply deter- mine whether shocks to competitive markets are absorbed via prices or via quanti- ties. Use the supply and demand diagram to prove the following four claims:

(a) When supply is inelastic, demand shocks are absorbed mostly via prices. (b) When supply is elastic, demand shocks are absorbed mostly via quantities.

(c) When demand is inelastic, supply shocks are absorbed mostly via prices. (d) When demand is elastic, supply shocks are absorbed mostly via quantities.