Exhibit 5.10

-Refer to Exhibit 5.10,which shows two upward-sloping linear supply curves that pass through the origin.The price elasticity of supply between $20 and $40 on the supply curve S' is _____
A)0.
B)infinity.
C)1.
D)2.
E)10.

Question

Exhibit 5.10
 
-Refer to Exhibit 5.10,which shows two upward-sloping linear supply curves that pass through the origin.The price elasticity of supply between $20 and $40 on the supply curve S' is _____
A)0. 
B)infinity. 
C)1. 
D)2. 
E)10.

Quizplus · Accepted Answer

The price elasticity of supply (PES) measures how much the quantity supplied of a good responds to a change in the price of that good. It is calculated as the percentage change in quantity supplied divided by the percentage change in price. For a linear supply curve that passes through the origin, the PES is constant along the curve. Since the supply curve S' is a straight line passing through the origin, the PES between any two points on this curve is the same. Given that the curve is upward sloping and linear, the PES is neither 0 (which would indicate a perfectly inelastic supply) nor infinity (which would indicate a perfectly elastic supply). The correct answer is 1, indicating unit elasticity, where the percentage change in quantity supplied is equal to the percentage change in price. This is characteristic of a linear supply curve passing through the origin, where the proportionate change in quantity supplied is equal to the proportionate change in price.

Exhibit 5.10 -Refer to Exhibit 5.10,which Shows Two Upward-Sloping Linear Supply Curves