The value of the price elasticity of supply depends primarily on how quickly firms can acquire inputs to increase quantity supplied when price increases.

Question

Quizplus · Accepted Answer

The price elasticity of supply measures the responsiveness of quantity supplied to a change in price, so it is influenced by the ease or difficulty for firms to increase production, which may depend on the availability, accessibility, and cost of inputs, technology, production processes, and other factors. Therefore, the value of the price elasticity of supply can vary depending on the time horizon, the degree of substitutability of inputs, and the flexibility of production capacity. In general, if firms can adjust their output relatively quickly and with little cost, the price elasticity of supply tends to be higher, signaling a more elastic supply, while if the adjustment is slow and costly, the supply tends to be more inelastic.

The Value of the Price Elasticity of Supply Depends Primarily