Factors that are supplied relatively inelastically earn more rents than those supplied more elastically.

Question

Quizplus · Accepted Answer

When a factor of production is supplied inelastically, its quantity supplied does not change much in response to changes in its price. This means that the producer of the factor has more market power and can command a higher price, resulting in higher rents. On the other hand, if a factor is supplied elastically, its quantity supplied can quickly increase in response to a price increase, limiting the potential for rent-seeking behavior.

Factors That Are Supplied Relatively Inelastically Earn More Rents Than