The most important determinant of the elasticity of supply is
A) whether the good is a durable good or a nondurable good.
B) the price of the good.
C) the time period firms have to adjust to the new price.
D) the proportion of the good in the budget of consumers.

Question

Quizplus · Accepted Answer

The most important determinant of elasticity of supply is the time period firms have to adjust to the new price. In the short run, firms may not be able to increase their production even if the price of the good increases, therefore, the supply will be relatively inelastic. In the long run, firms have more time to adjust their production, for example by investing in new machinery or hiring more workers, which makes supply more elastic. The other options - whether the good is durable or nondurable, the price of the good, and the proportion of the good in the budget of consumers - may also have an impact on the elasticity of supply, but they are not the most important determinants.

The Most Important Determinant of the Elasticity of Supply Is