If supply is price inelastic, the value of the price elasticity of supply must be
A) infinite.
B) zero.
C) less than 1.
D) unity
E) greater than 1.

Question

Quizplus · Accepted Answer

If supply is price inelastic, it means that the percentage change in quantity supplied is less than the percentage change in price. This is only possible if the value of the price elasticity of supply (Ep) is less than 1. If Ep was equal to 1 or greater than 1, the percentage change in quantity supplied would be greater than the percentage change in price, resulting in price elastic supply. If Ep was zero, it would mean that there is no change in quantity supplied even if there is a change in price, which is unlikely to happen in most cases. If Ep was infinite, it would mean that any change in price would result in an infinite change in quantity supplied, which is also unlikely to happen in reality.

If Supply Is Price Inelastic, the Value of the Price