Question 1

The price elasticity of supply is 6. This means that
A) a $10 increase in price would increase quantity supplied by 60.
B) a 10 percent increase in price would increase quantity supplied by 60 percent.
C) a 10 percent increase in quantity will occur when price increases by 0.6 percent.
D) a 10 percent increase in quantity will occur when price increases by 6 percent.

Accepted Answer

The price elasticity of supply formula is (% change in quantity supplied / % change in price). A value of 6 means that for a 10 percent increase in price, there would be a 60 percent increase in quantity supplied. Therefore, option B is correct. Option A is incorrect as it calculates the increase in quantity supplied using a fixed dollar amount instead of a percentage increase. Option C and D are incorrect as they use the opposite relationship between the percentage change in quantity and price than what is implied by a price elasticity value of 6.

Question 2

If the price of hotdogs increases by 10 percent and the quantity supplied by meat packing companies increases by 15 percent, what is the price elasticity of supply?
A) 1.65
B) 1.20
C) 0.67
D) 1.50

Accepted Answer

Price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. Here, it is 15% / 10% = 1.50.

Question 3

Why is time such an important determinant in the elasticity of supply? Is time also important in determining price elasticity of demand? Explain.

Accepted Answer

The answer of Why is time such an important determinant...

Question 4

Tickets for the Super Bowl are an example of supply that is
A) perfectly elastic.
B) unit elastic.
C) slightly inelastic.
D) perfectly inelastic.

Accepted Answer

Super Bowl tickets are an example of a perfectly inelastic supply because the number of tickets available is fixed and does not change regardless of the price.

Question 5

A supply curve that is parallel to the price axis is
A) perfectly elastic.
B) perfectly inelastic.
C) relatively inelastic.
D) unitary elastic.

Accepted Answer

A supply curve that is parallel to the price axis indicates that there is no change in the quantity supplied despite any change in price. This is the characteristic of a perfectly inelastic supply curve.

Question 6

If the price elasticity of supply is equal to 1, we would say the supply of the item is
A) unit elastic.
B) inelastic.
C) elastic.
D) perfectly elastic.

Accepted Answer

A price elasticity of supply of 1 means that the percentage change in quantity supplied is equal to the percentage change in price. This is known as unit elasticity, and indicates that suppliers are responsive to changes in price in a proportionate manner.

Question 7

The paintings of a world famous artist Vincent Van Gogh have a price elasticity of supply
A) equal to 2.0.
B) equal to 1.0.
C) close to 0.0.
D) approaching infinity.

Accepted Answer

The price elasticity of supply for Van Gogh's paintings is close to 0.0 because the supply is very limited since Van Gogh only painted a limited number of works during his lifetime, and these paintings are now considered priceless and irreplaceable. This means that even if the price of Van Gogh's paintings were to increase significantly, the supply would remain relatively unchanged as there are no new paintings being produced. Therefore, the elasticity of supply is very low, or close to 0.0.

Question 8

A supply curve that is parallel to the quantity axis is
A) perfectly elastic.
B) perfectly inelastic.
C) relatively inelastic.
D) unitary elastic.

Accepted Answer

A supply curve that is parallel to the quantity axis indicates that any change in price will not affect the quantity supplied, which is characteristic of a perfectly elastic supply.

Question 9

For most items, we find the price elasticity of supply will be
A) negative.
B) positive.
C) zero.
D) infinity.

Accepted Answer

The price elasticity of supply measures the responsiveness of quantity supplied to changes in price. In general, as price increases, suppliers have an incentive to produce and offer more of a good or service, so quantity supplied tends to increase as well. Therefore, price elasticity of supply is typically positive. However, there can be exceptions, such as when a market is constrained by limited resources, in which case elasticity could be zero or even negative.

Question 10

The shorter the time period that suppliers have to adjust to price changes, the
A) lower will be the price elasticity of supply.
B) higher will be the price elasticity of supply.
C) higher will be the price elasticity of demand.
D) lower will be the price elasticity of demand.

Accepted Answer

The price elasticity of supply measures how much the quantity supplied responds to a change in price. If suppliers have a short time to adjust to price changes, they cannot easily change the amount of the product they produce or supply, making the supply less responsive (or more inelastic) to price changes. Hence, the shorter the adjustment period, the lower the price elasticity of supply.

Question 11

Which of the following statements is correct?
A) Supply is more elastic in the short run than in long run.
B) Supply is more elastic in the long run than in short run.
C) Price elasticity of supply is constant along the supply curve.
D) Price elasticity of supply is always a negative number.

Accepted Answer

In the short run, producers are limited in their ability to increase production due to fixed inputs such as factory space or specialized labor. In the long run, however, these inputs can be adjusted, allowing for a more flexible response to changes in price. Therefore, supply is more elastic in the long run than in the short run.

Answer: C
 Price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. This holds true regardless of where on the supply curve the price and quantity are located. Therefore, price elasticity of supply is constant along the supply curve.

Answer: D 
 Price elasticity of supply can be either positive or negative, depending on the direction of the change in price and quantity supplied. However, regardless of the sign, the value of price elasticity of supply is always a positive number.

Question 12

Why is the price elasticity of supply greater if there is more time for adjustment to an increase in the price of an item?

Accepted Answer

The answer of Why is the price elasticity of supply...

Quiz 19: Demand and Supply Elasticity

The price elasticity of supply is 6. This means that

If the price of hotdogs increases by 10 percent and the quantity supplied by meat packing companies increases by 15 percent, what is the price elasticity of supply?

Why is time such an important determinant in the elasticity of supply? Is time also important in determining price elasticity of demand? Explain.

Tickets for the Super Bowl are an example of supply that is

A supply curve that is parallel to the price axis is

If the price elasticity of supply is equal to 1, we would say the supply of the item is

The paintings of a world famous artist Vincent Van Gogh have a price elasticity of supply

A supply curve that is parallel to the quantity axis is

For most items, we find the price elasticity of supply will be

The shorter the time period that suppliers have to adjust to price changes, the

Which of the following statements is correct?

Why is the price elasticity of supply greater if there is more time for adjustment to an increase in the price of an item?