Price Elasticity of Supply
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Questions and Answers

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?

%ΔQS / %ΔP

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?

<p>In an inelastic supply, quantity supplied changes less than proportionately to price changes, while in an elastic supply, quantity supplied changes more than proportionately to price changes.</p> Signup and view all the answers

What is the unit of measurement for the price elasticity of supply?

<p>No unit, as it is a ratio of percentage changes.</p> Signup and view all the answers

What happens to the quantity supplied when the price elasticity of supply is unit elastic?

<p>The quantity supplied changes proportionately to the price change.</p> Signup and view all the answers

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?

<p>Perfectly inelastic (PES = 0)</p> Signup and view all the answers

If the price elasticity of supply is 2, what will happen to the quantity supplied if the price increases by 10%?

<p>The quantity supplied will increase by 20%.</p> Signup and view all the answers

What is the main difference between an inelastic supply and an elastic supply?

<p>An inelastic supply changes less than proportionately to price changes, while an elastic supply changes more than proportionately to price changes.</p> Signup and view all the answers

What happens to the quantity supplied when the price elasticity of supply is perfectly elastic?

<p>The quantity supplied is infinitely responsive to price changes.</p> Signup and view all the answers

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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Description

This quiz covers the concept of price elasticity of supply, measuring the responsiveness of quantity supply to price changes, and its formula.

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