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Questions and Answers
What does the price elasticity of supply measure?
What does the price elasticity of supply measure?
The responsiveness of quantity supplied due to a change in price, holding other factors constant.
What is the formula for calculating the price elasticity of supply?
What is the formula for calculating the price elasticity of supply?
%ΔQS / %ΔP
What is the defining characteristic of a perfectly elastic supply?
What is the defining characteristic of a perfectly elastic supply?
Quantity supplied is infinitely responsive to price changes.
What is the difference between an inelastic supply and an elastic supply?
What is the difference between an inelastic supply and an elastic supply?
What is the unit of measurement for the price elasticity of supply?
What is the unit of measurement for the price elasticity of supply?
What happens to the quantity supplied when the price elasticity of supply is unit elastic?
What happens to the quantity supplied when the price elasticity of supply is unit elastic?
A supply curve is upward sloping, but the quantity supplied does not change when the price changes. What is the price elasticity of supply in this scenario?
A supply curve is upward sloping, but the quantity supplied does not change when the price changes. What is the price elasticity of supply in this scenario?
If the price elasticity of supply is 2, what will happen to the quantity supplied if the price increases by 10%?
If the price elasticity of supply is 2, what will happen to the quantity supplied if the price increases by 10%?
What is the main difference between an inelastic supply and an elastic supply?
What is the main difference between an inelastic supply and an elastic supply?
What happens to the quantity supplied when the price elasticity of supply is perfectly elastic?
What happens to the quantity supplied when the price elasticity of supply is perfectly elastic?
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Study Notes
Price Elasticity of Supply
- Measures the responsiveness of quantity supplied due to a change in price, with other factors held constant.
- Formula: PES = %∆Qs / %∆P
Degrees of Price Elasticity of Supply
- Perfectly Inelastic Supply (PES = 0): Quantity supplied does not change with price changes.
- Inelastic Supply (PES < 1): Quantity supplied changes less than proportionately to price changes.
- Unit Elastic Supply (PES = 1): Quantity supplied changes proportionately to price changes.
- Elastic Supply (PES > 1): Quantity supplied changes more than proportionately to price changes.
- Perfectly Elastic Supply (PES = ∞): Quantity supplied is infinitely responsive to price changes.
Price Elasticity of Supply
- Measures the responsiveness of quantity supplied due to a change in price, with other factors held constant.
- Formula: PES = %∆Qs / %∆P
Degrees of Price Elasticity of Supply
- Perfectly Inelastic Supply (PES = 0): Quantity supplied does not change with price changes.
- Inelastic Supply (PES < 1): Quantity supplied changes less than proportionately to price changes.
- Unit Elastic Supply (PES = 1): Quantity supplied changes proportionately to price changes.
- Elastic Supply (PES > 1): Quantity supplied changes more than proportionately to price changes.
- Perfectly Elastic Supply (PES = ∞): Quantity supplied is infinitely responsive to price changes.
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