case, the technological breakthrough leads to a much greater quantity sold in the market at very close to the

original price. Consumers benefit more, in general, when the demand curve is more inelastic because the shift

in the supply results in a much lower price for consumers.

5.3 • Elasticity and Pricing 123

FIGURE 5.8 Passing along Cost Savings to Consumers Cost-saving gains cause supply to shift out to the right from
S0 to S1; that is, at any given price, firms will be willing to supply a greater quantity. If demand is inelastic, as in (a),
the result of this cost-saving technological improvement will be substantially lower prices. If demand is elastic, as in

(b), the result will be only slightly lower prices. Consumers benefit in either case, from a greater quantity at a lower

price, but the benefit is greater when demand is inelastic, as in (a).

Aspirin producers may find themselves in a nasty bind here. The situation in Figure 5.8, with extremely
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