Question 1

Which of the following statements is true?
A) The supply of oil is very elastic over short time periods but becomes perfectly inelastic over time. A given shift in supply results in a greater increase in the price of oil when the supply of oil is perfectly inelastic.
B) The supply of oil is very inelastic over short time periods but becomes more elastic over time. A given shift in supply results in a smaller increase in the price of oil when the supply is more elastic.
C) The supply of oil is perfectly inelastic; therefore, as the demand for oil increases over time, the price of oil increases significantly.
D) Over short periods of time, increases in the demand for oil are greater than increases in the supply of oil. Over the long run, increases in the demand and the supply of oil are about equal. As a result, the price of oil increases greatly in the short run but is stable in the long run.

Accepted Answer

According to the law of supply, the supply of a good becomes more elastic over time as producers have more time to adjust their production levels in response to changes in price. Therefore, statement B is true. On the other hand, statement A is incorrect because the supply of oil cannot be perfectly inelastic as it would mean that no matter how much the price of oil changes, the quantity supplied remains the same. Statement C is also incorrect because the supply of oil is not perfectly inelastic but rather becomes more elastic over time. Statement D is partially correct in that there is typically a lag in supply response to changes in demand, but it is not true that increases in demand and supply are about equal in the long run.

Question 2

Figure 4.9 -Refer to Figure 4.9.The diagram shows two supply curves,S_A and S_B.As price rises from P₀ to P₁,which supply curve is more elastic? A) S_A B) S_B C) They are equally inelastic D) They are equally elastic

Accepted Answer

As price rises from P₀ to P₁, S_B undergoes a larger expansion in quantity supplied compared to S_A. Thus, S_B is more elastic than S_A.

Question 3

Figure 4.9 -Refer to Figure 4.9.Suppose the diagram shows the supply curves for a product in the short run and in the long run.Which supply curve represents supply in the short run and which curve represents supply in the long run? A) S_B represents supply in the short run, and S_A represents supply in the long run. B) Either S_A or S_B could represent supply in the short run; in the long run, the supply curve must be a vertical line. C) Either S_A or S_B could represent supply in the long run; in the short run, the supply curve must be a horizontal line. D) S_A represents supply in the short run, and S_B represents supply in the long run.

Accepted Answer

The supply curve that is upward sloping represents the short run, as firms are able to increase their quantity supplied in response to higher prices due to fixed inputs. The supply curve that is vertical represents the long run, as all inputs are variable and firms can adjust their production levels to any price level. Therefore, S_A represents supply in the short run, and S_B represents supply in the long run.

Question 4

The price elasticity of supply of hot dog buns is estimated to be 1.5.Holding everything else constant,this means that a 10 per cent decrease in the price of hot dog buns will cause the quantity of hot dog buns supplied to decrease by ______.
A) 1.5 per cent
B) 15 per cent
C) approximately 25 per cent
D) approximately 5 per cent

Accepted Answer

The price elasticity of supply (PES) formula is:
PES = % change in quantity supplied / % change in price
From the given information, PES = 1.5. 
A 10% decrease in price means the % change in price is -10%. 
Using the PES formula, we can solve for the % change in quantity supplied:
1.5 = % change in quantity supplied / -10%
% change in quantity supplied = 1.5 x (-10%) = -15%
Therefore, a 10% decrease in price will cause the quantity of hot dog buns supplied to decrease by 15%.

Question 5

To calculate the price elasticity of supply,we divide________.
A) the percentage change in price by the percentage change in quantity supplied
B) the percentage change in quantity supplied by the percentage change in price
C) rise by the run
D) the average price by the average quantity supplied

Accepted Answer

Price elasticity of supply is calculated by dividing the percentage change in quantity supplied by the percentage change in price. This gives us an idea of the responsiveness of the quantity supplied to changes in price.

Question 6

Inelastic supply occurs whenever the elasticity of supply value is ______.
A) negative and < −1
B) any positive number
C) positive and > 1
D) positive and < 1

Accepted Answer

Inelastic supply occurs when the elasticity of supply value is less than 1. This means that the quantity supplied does not change much when there is a change in price. When the elasticity of supply is greater than 1, it is said to be elastic supply, where a change in price results in a larger change in quantity supplied. Therefore, option D, i.e., positive and < 1 is the correct choice for inelastic supply.

Question 7

A supply curve that is vertical________.
A) is perfectly elastic
B) is perfectly inelastic
C) is impossible
D) has an elasticity equal to 1

Accepted Answer

A vertical supply curve means that the quantity supplied does not change with a change in price, indicating perfect inelasticity of supply.

Question 8

The price elasticity of supply is calculated as the change in supply divided by the change in price.

Accepted Answer

The answer of The price elasticity of supply is calculated...

Question 9

The process involved in bringing oil to world markets can take years.Substitutes for oil-based products such as petrol are limited.As a result________.
A) the supply of oil is very elastic and the demand for oil is very elastic over short periods of time
B) the supply of oil is very inelastic and the demand for petrol is inelastic over short periods of time
C) the supply of oil and the demand for oil shift to the right over short periods of time
D) the supply of oil and the demand for oil are both perfectly elastic over short periods of time

Accepted Answer

The process of bringing oil to world markets takes years and substitutes for oil-based products such as petrol are limited. This means that the supply of oil is very inelastic, as it cannot easily be increased to meet sudden changes in demand. Similarly, the demand for petrol is also inelastic over short periods of time, as consumers are dependent on it and cannot easily switch to alternatives.

Question 10

If an 8 per cent decrease in the price of lobster leads to a 15 per cent decrease in the quantity supplied of lobster,then the supply of lobster is _______.
A) unit-elastic
B) unitarily elastic
C) elastic
D) perfectly inelastic

Accepted Answer

The decrease in price led to a larger decrease in the quantity supplied, indicating that the supply of lobster is elastic.

Question 11

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

Accepted Answer

The price elasticity of supply measures the responsiveness of quantity supplied to changes in price. The speed at which firms can acquire inputs to increase production will impact their ability to respond to price changes and thus affect the price elasticity of supply. Therefore, the statement is true.

Question 12

The price elasticity of supply is usually a positive number because ________.
A) quantity supplied increases in response to income increases
B) quantity supplied increases in response to price increases
C) the quantity demanded usually rises when price falls, and therefore suppliers would want to capitalise on this increase in demand
D) price rises when supply increases

Accepted Answer

The price elasticity of supply measures the responsiveness of quantity supplied to a change in price. In general, if the price of a good or service increases, suppliers will be incentivized to increase production in order to take advantage of the higher prices and increase their profits. Similarly, a decrease in price will lead to a decrease in the quantity supplied. Therefore, the price elasticity of supply is usually a positive number, indicating that as price rises, quantity supplied also rises.

Question 13

Suppose the demand curve for a product is represented by a typical downward-sloping curve.Now suppose the demand for this product increases.Which of the following statements accurately predicts the resulting increase 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 increase.
C) The increase in price is not affected by the elasticity of the supply curve.
D) There will be no increase in price if the supply curve is perfectly inelastic.

Accepted Answer

If demand for a product increases and the supply curve is more elastic, then suppliers are able to increase their production levels more easily in response to the increased demand, thus putting downward pressure on prices. Therefore, the more elastic the supply curve, the smaller the price increase.

Question 14

Suppose the supply curve for digital cameras shifts to the right.This will cause a relatively large decrease in the price of digital cameras if both demand and supply are inelastic.

Accepted Answer

The answer of Suppose the supply curve for digital cameras...

Question 15

Shifts in the supply of oil have caused large changes in price since the 1970s because ______.
A) the supply of oil is very inelastic while the demand for oil is very elastic over short periods of time
B) the supply of oil is very elastic while the demand for oil is inelastic over short periods of time
C) both the supply of oil and the demand for oil are inelastic over short periods of time
D) the supply of oil and the demand for oil are perfectly elastic over short periods of time

Accepted Answer

The answer of Shifts in the supply of oil have...

Question 16

Suppose the supply of bicycles is price elastic.This means that________.
A) consumers will respond significantly to an increase in the quantity supplied of bicycles
B) suppliers will increase the quantity supplied of bicycles, but not immediately
C) suppliers face many substitutes for bicycles
D) suppliers will respond significantly to changes in the price of bicycles

Accepted Answer

The answer of Suppose the supply of bicycles is price...

Question 17

Which of the following is a key determinant of the price elasticity of supply?
A) The slope of the supply curve
B) The availability of substitutes in production
C) The available technology
D) The time it takes to change output in response to a change in price

Accepted Answer

The time it takes to change output in response to a change in price is a key determinant of price elasticity of supply. In the short run, producers may not be able to adjust their output levels as quickly as they can in the long run. Thus, the price elasticity of supply is likely to be greater in the long run than in the short run. This means that if the price of a good changes, producers will be more responsive in the long run compared to the short run.

Question 18

Suppose the demand curve for hybrid cars shifts to the right.This will cause a relatively small increase in the price of hybrid cars if _______.
A) demand is elastic and supply is inelastic
B) demand is inelastic and supply is elastic
C) both demand and supply are inelastic
D) both demand and supply are elastic

Accepted Answer

The answer of Suppose the demand curve for hybrid cars...

Question 19

Suppose when the price of jean jackets increased by 10 per cent,the quantity supplied increased by 16 per cent.Based on this information the price elasticity of supply of jean jackets is ________.
A) 0.625 per cent
B) 6% per cent
C) 1.6 per cent

Accepted Answer

The price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. Here, it is 16% / 10% = 1.6.

Question 20

If a supply curve is a horizontal line,supply is said to be ______.
A) perfectly inelastic
B) unit-elastic
C) inelastic
D) perfectly elastic

Accepted Answer

If a supply curve is a horizontal line, it means that no matter what the price is, the quantity supplied will remain the same. This is only possible with a perfectly elastic supply.

Quiz 4: Elasticity: The Responsiveness of Demand and Supply

Which of the following statements is true?

Figure 4.9 -Refer to Figure 4.9.The diagram shows two supply curves,SA and SB.As price rises from P0 to P1,which supply curve is more elastic?

Figure 4.9 -Refer to Figure 4.9.Suppose the diagram shows the supply curves for a product in the short run and in the long run.Which supply curve represents supply in the short run and which curve represents supply in the long run?

The price elasticity of supply of hot dog buns is estimated to be 1.5.Holding everything else constant,this means that a 10 per cent decrease in the price of hot dog buns will cause the quantity of hot dog buns supplied to decrease by ______.

To calculate the price elasticity of supply,we divide________.

Inelastic supply occurs whenever the elasticity of supply value is ______.

A supply curve that is vertical________.

The price elasticity of supply is calculated as the change in supply divided by the change in price.

The process involved in bringing oil to world markets can take years.Substitutes for oil-based products such as petrol are limited.As a result________.

If an 8 per cent decrease in the price of lobster leads to a 15 per cent decrease in the quantity supplied of lobster,then the supply of lobster is _______.

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

The price elasticity of supply is usually a positive number because ________.

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

Suppose the supply curve for digital cameras shifts to the right.This will cause a relatively large decrease in the price of digital cameras if both demand and supply are inelastic.

Shifts in the supply of oil have caused large changes in price since the 1970s because ______.

Suppose the supply of bicycles is price elastic.This means that________.

Which of the following is a key determinant of the price elasticity of supply?

Suppose the demand curve for hybrid cars shifts to the right.This will cause a relatively small increase in the price of hybrid cars if _______.

Suppose when the price of jean jackets increased by 10 per cent,the quantity supplied increased by 16 per cent.Based on this information the price elasticity of supply of jean jackets is ________.

If a supply curve is a horizontal line,supply is said to be ______.

Figure 4.9 -Refer to Figure 4.9.The diagram shows two supply curves,S_A and S_B.As price rises from P₀ to P₁,which supply curve is more elastic?