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5.3 • Elasticity and Pricing 127

FIGURE 5.11 How a Shift in Supply Can Affect Price or Quantity The intersection (E0) between demand curve D and
supply curve S0 is the same in both (a) and (b). The shift of supply to the left from S0 to S1 is identical in both (a) and
(b). The new equilibrium (E1) has a higher price and a lower quantity than the original equilibrium (E0) in both (a) and
(b). However, the shape of the demand curve D is different in (a) and (b), being more elastic in (b) than in (a). As a

result, the shift in supply can result either in a new equilibrium with a much higher price and an only slightly smaller

quantity, as in (a), with more inelastic demand, or in a new equilibrium with only a small increase in price and a

relatively larger reduction in quantity, as in (b), with more elastic demand.
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