Economics A Level: In terms of Spare Capacity, what state is it in when:
1. AS is Very Elastic
2. AS is Very Inelastic

Question

In terms of Spare Capacity, what state is it in when:
1. AS is Very Elastic
2. AS is Very Inelastic

go kys · Accepted Answer

1. AS being Elastic means there is Lots of Spare Capacity in the Economy. After an Injection [AD Shifts Right] the Multiplier takes hold to make a Large Rise in Output
2. AS being Inelastic means there is Little Spare Capacity in the Economy. So after an Injection there will be a Small Rise in Output, but much Greater in Prices

Economics A Level

In terms of Spare Capacity, what state is it in when: 1. AS is Very Elastic 2. AS is Very Inelastic

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