in Schweser notes book2, P116, figure 3 and CFAi book2, P272 figure8 , P274 figure 9. it is hardly to understand that non-renewable resource(e.g. oil) supply curve is perfect elastic(horizontal), and renewable resource(e.g. water) one is perfect inelastic (vertical). – I think non-renewable one is perfect inelastic (vertical) since its q’ty is limited in the world. Could you pls explain this to me?
I think that when they say that non-renewable resource has a perfectly elastic (horizontal) curve, it means to say that if the price changes then the quantity supplied would be 0 whereas howmuch ever the price for the renewable resource changes, the quantity would not be affected. Hope that helps.
yes, this make sense.
the non-renewable resource supply curve is perfect elastic coz the quantity supplied is determined at the market price. They won’t produce more coz anyway those extra production wont be sold coz it cost more than what the custumer can afford. For a renewable resource, the supply curve is inelastic coz there will be no change in demand when price change. The customer knows that they can expect to lower price because there is a huge number of available products.
> The customer knows that they can expect to lower price because there is a huge number of available products. If the supply curve is (perfectly) inelastic, the number of available products is fixed, so a drop in price does not change the supplied products size. Question: Can you think of a product whose demand and supply curves are both perfectly inelastic? Or they are as much inelastic as possible? This will be a product whose demand and supply (both) are not affected by price. Also, is there a product whose demand and supply curves are both perfectly elastic?