Question 1

The price elasticity of supply measures________.
A) the responsiveness of quantity supplied to changes in input prices
B) the responsiveness of quantity supplied to changes in technology
C) the responsiveness of quantity supplied to changes in price
D) a supplier's ability to produce a good in the face of scarcity

Accepted Answer

The price elasticity of supply measures the percentage change in the quantity supplied of a good or service in response to a percentage change in the price of that good or service. It measures the responsiveness of quantity supplied to changes in price.

Question 2

Price elasticity of supply is used to gauge________.
A) how responsive suppliers are to price changes
B) how responsive suppliers are to changes in future prices
C) how responsive suppliers are to a change in demand
D) how responsive sales are to a change in input prices

Accepted Answer

Price elasticity of supply measures the responsiveness of suppliers to changes in the price of a good or service. A higher elasticity means that suppliers are more responsive to price changes, while a lower elasticity indicates that suppliers are less flexible in adjusting their supply in response to price fluctuations.

Question 3

Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8 000 units to 10 000 units.Use the midpoint formula to calculate the price elasticity of supply.
A) 1.22
B) 1.0
C) 0.82
D) 0.07

Accepted Answer

The answer of Suppose that the price of a money...

Question 4

If,for a given percentage increase in price,quantity supplied increases by a proportionately larger percentage,then supply is ________.
A) unit-elastic
B) perfectly elastic
C) relatively inelastic
D) elastic

Accepted Answer

When a given percentage increase in price results in a proportionately larger percentage increase in quantity supplied, supply is considered elastic. This means that producers are responsive to changes in price and can easily adjust their production to meet the changes in demand.

Question 5

Figure 4.7 
-Refer to Figure 4.7.A perfectly elastic supply curve is shown in _______.
A) Panel A
B) Panel B
C) Panel C
D) Panel D

Accepted Answer

A perfectly elastic supply curve is represented by a horizontal line, indicating that suppliers are willing to supply any quantity at a specific price. Panel B shows this characteristic.

Question 6

If,for a given percentage decrease in price,quantity supplied decreases by a proportionately smaller percentage,then supply is ________.
A) unit-elastic
B) perfectly elastic
C) relatively inelastic
D) elastic

Accepted Answer

When a percentage decrease in price leads to a proportionately smaller decrease in quantity supplied, it shows that supply is relatively inelastic. This means that the change in price has a lesser effect on the quantity of the good supplied, indicating that the good is less responsive to changes in price.

Question 7

Suppose a 4 per cent increase in price results in a 2 per cent increase in the quantity supplied of a good.Calculate the price elasticity of supply and characterise the product.
A) 2; the product is elastic.
B) 0.2; the product is inelastic.
C) 0.5; the product is inelastic.
D) 50%; the product is inelastic.

Accepted Answer

Price elasticity of supply = (% change in quantity supplied / % change in price)
= (2% / 4%) = 0.5
Since the price elasticity of supply is less than 1, the product is inelastic.

Question 8

The price elasticity of supply for umbrellas is 2.Suppose you are told that following a price increase,quantity supplied increased by 30 per cent.What was the percentage change in price that brought this about?
A) 60 per cent
B) 15 per cent
C) 6.7 per cent
D) Impossible to determine without additional information

Accepted Answer

Price elasticity of supply (PES) = % change in quantity supplied / % change in price
Given: PES = 2, % change in quantity supplied = 30%
Using the formula, we can find the % change in price:
2 = 30% / % change in price
% change in price = 30% / 2 = 15%
Therefore, the percentage change in price that brought about a 30% increase in quantity supplied is 15%. Answer choice B is correct.

Question 9

If firms do not increase their quantity supplied when price changes,then supply is ________.
A) perfectly elastic
B) perfectly inelastic
C) relatively inelastic
D) elastic

Accepted Answer

When firms do not increase their quantity supplied when price changes, supply is said to be perfectly inelastic. This means that the quantity supplied remains the same regardless of changes in price.

Question 10

The price elasticity of the supply of teenage labour services is approximately 1.36.Suppose the minimum wage rises from $7.25 per hour to $8.75.Using the midpoint formula,calculate the approximate change in the quantity supplied of teenage labour.
A) 7.3 per cent
B) 14.4 per cent
C) 25.5 per cent
D) There is insufficient information to answer the question.

Accepted Answer

Using the midpoint formula, the percentage change in the minimum wage is:

[(8.75 - 7.25)/((8.75 + 7.25)/2)] x 100% = 20.69%

The elasticity of supply is 1.36, so the percentage change in the quantity supplied will be approximately:

1.36 x 20.69% = 28.13%

Therefore, the approximate change in the quantity supplied of teenage labour is 25.5%, which is closest to option C (25.5%).

Question 11

Suppose the value of the price elasticity of supply is 4.What does this mean?
A) A 4 per cent increase in the price of the good causes quantity supplied to increase by 1 per cent.
B) A 1 per cent increase in the price of the good causes the supply curve to shift upward by 4 per cent.
C) A 1 per cent increase in the price of the good causes quantity supplied to increase by 4 per cent.
D) For every $1 increase in price, quantity supplied increases by 4 units.

Accepted Answer

The price elasticity of supply (PES) measures how much the quantity supplied responds to a change in price. A PES of 4 means that a 1% increase in the price of the good causes quantity supplied to increase by 4%. Therefore, choice C is the best answer. Option A is incorrect because PES measures the percentage change in quantity supplied, not the absolute change. Option B is incorrect because PES does not shift the supply curve, but reflects the slope of the existing supply curve. Option D is also incorrect because it implies a fixed increase in quantity supplied for each unit increase in price, regardless of the starting price or quantity supplied.

Question 12

The price elasticity of an upward-sloping supply curve is always________.
A) positive
B) negative
C) greater than one
D) impossible to determine

Accepted Answer

The price elasticity of supply measures the responsiveness of quantity supplied to changes in price. An upward-sloping supply curve indicates that as price increases, quantity supplied also increases. Therefore, the price elasticity of supply will always be positive.

Question 13

Figure 4.7 
-Refer to Figure 4.7.The supply curve on which price elasticity changes at every point is shown in ________.
A) Panel A
B) Panel B
C) Panel C
D) Panel D

Accepted Answer

The answer of Figure 4.7 
-Refer to Figure 4.7.The supply...

Question 14

Figure 4.7 
-Refer to Figure 4.7.A perfectly inelastic supply curve is shown in ________.
A) Panel A
B) Panel B
C) Panel C
D) Panel D

Accepted Answer

The answer of Figure 4.7 
-Refer to Figure 4.7.A perfectly...

Question 15

The price elasticity of supply is equal to________.
A) the value of the slope of the supply curve
B) the change in quantity supplied divided by the change in price
C) the percentage change in price divided by the percentage change in quantity supplied
D) the percentage change in quantity supplied divided by the percentage change in price

Accepted Answer

The price elasticity of supply measures the responsiveness of quantity supplied to changes in price, which is calculated as the percentage change in quantity supplied divided by the percentage change in price. Therefore, the best choice is D. The other options are incorrect as they do not reflect the definition of price elasticity of supply.

Question 16

Figure 4.8 
-Refer to Figure 4.8.What is the value of the price elasticity of supply between g and h?
A) 20
B) 0.5
C) 2
D) 0.02

Accepted Answer

The value of the price elasticity of supply between g and h can be calculated using the formula: % change in quantity supplied / % change in price. From point g to h, the quantity supplied changes from 40 to 80 (an increase of 100%), while the price changes from $10 to $20 (an increase of 100%). Therefore, the price elasticity of supply between g and h is: (100%/100%) / (100%/100%) = 1. Using the midpoint formula, the value of the price elasticity of supply between g and h is: [(80-40)/((80+40)/2)] / [(20-10)/((20+10)/2)] = 2. Therefore, the correct answer is C.

Question 17

Bringing oil to the market is a relatively long and costly process.The whole process from exploration to pumping significant amounts of oil can take years.What does this indicate about the price elasticity of supply for oil?
A) The elasticity coefficient is likely to be very high, and supply is inelastic.
B) The elasticity coefficient is likely to be close to zero, and supply is perfectly elastic.
C) The elasticity coefficient is likely to be low, and supply is highly inelastic.
D) The elasticity coefficient is likely to be low, and supply is highly elastic.

Accepted Answer

The fact that bringing oil to the market is a long and costly process indicates that the supply of oil is likely to be highly inelastic. This is because it takes a significant amount of time and resources to increase the production of oil, meaning that changes in demand will result in relatively small changes in supply in the short term. As a result, the elasticity coefficient is likely to be low.

Question 18

Over longer periods of time,increases in oil prices provide firms with incentives to explore and recover oil.What does this indicate about the long-run price elasticity of supply for oil?
A) The elasticity coefficient is likely to be higher in the long run than in the short run.
B) The elasticity coefficient is likely to be lower in the long run than in the short run.
C) The elasticity coefficient approaches 0 in the long run as supplies are depleted.
D) The elasticity coefficient is unstable in the long run because oil supplies may be depleted.

Accepted Answer

Over longer periods of time, firms have more time to adjust their production capacities and explore new sources of oil, resulting in a higher price elasticity of supply in the long run compared to the short run. Additionally, technological advancements may also increase the supply of oil in the long run, further contributing to a higher elasticity coefficient.

Question 19

Suppose the demand curve for a product is represented by a typical downward-sloping curve.Now suppose the demand for this product decreases.Which of the following statements accurately predicts the resulting decrease in price?
A) The more elastic the supply curve, the greater the price increase.
B) The more elastic the supply curve, the smaller the price decrease.
C) The increase in price is not affected by the elasticity of the supply curve.
D) The decrease in price will always be proportional to the magnitude of the demand shift.

Accepted Answer

According to the law of supply and demand, a decrease in demand should lead to a decrease in price. The elasticity of the supply curve measures the responsiveness of the quantity supplied to changes in price. If the supply curve is more elastic, producers will be able to respond to the decrease in demand by reducing their prices to a smaller extent in order to maintain equilibrium. Therefore, the more elastic the supply curve, the smaller the price decrease.

Question 20

Figure 4.7 
-Refer to Figure 4.7.A unit-elastic supply curve is shown in ________.
A) Panel A
B) Panel B
C) Panel C
D) Panel D

Accepted Answer

A unit-elastic supply curve is represented by a straight line passing through the origin, as shown in Panel C. This indicates that the percentage change in quantity supplied is equal to the percentage change in price, which is the definition of unit elasticity.

Quiz 4: Elasticity: The Responsiveness of Demand and Supply

The price elasticity of supply measures________.

Price elasticity of supply is used to gauge________.

Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8 000 units to 10 000 units.Use the midpoint formula to calculate the price elasticity of supply.

If,for a given percentage increase in price,quantity supplied increases by a proportionately larger percentage,then supply is ________.

Figure 4.7 -Refer to Figure 4.7.A perfectly elastic supply curve is shown in _______.

If,for a given percentage decrease in price,quantity supplied decreases by a proportionately smaller percentage,then supply is ________.

Suppose a 4 per cent increase in price results in a 2 per cent increase in the quantity supplied of a good.Calculate the price elasticity of supply and characterise the product.

The price elasticity of supply for umbrellas is 2.Suppose you are told that following a price increase,quantity supplied increased by 30 per cent.What was the percentage change in price that brought this about?

If firms do not increase their quantity supplied when price changes,then supply is ________.

The price elasticity of the supply of teenage labour services is approximately 1.36.Suppose the minimum wage rises from $7.25 per hour to $8.75.Using the midpoint formula,calculate the approximate change in the quantity supplied of teenage labour.

Suppose the value of the price elasticity of supply is 4.What does this mean?

The price elasticity of an upward-sloping supply curve is always________.

Figure 4.7 -Refer to Figure 4.7.The supply curve on which price elasticity changes at every point is shown in ________.

Figure 4.7 -Refer to Figure 4.7.A perfectly inelastic supply curve is shown in ________.

The price elasticity of supply is equal to________.

Figure 4.8 -Refer to Figure 4.8.What is the value of the price elasticity of supply between g and h?

Bringing oil to the market is a relatively long and costly process.The whole process from exploration to pumping significant amounts of oil can take years.What does this indicate about the price elasticity of supply for oil?

Over longer periods of time,increases in oil prices provide firms with incentives to explore and recover oil.What does this indicate about the long-run price elasticity of supply for oil?

Suppose the demand curve for a product is represented by a typical downward-sloping curve.Now suppose the demand for this product decreases.Which of the following statements accurately predicts the resulting decrease in price?

Figure 4.7 -Refer to Figure 4.7.A unit-elastic supply curve is shown in ________.