A determinant of the price elasticity of supply that is also a determinant of the price elasticity of demand is:
A) availability of inputs.
B) flexibility of the production process.
C) adjustment time.
D) whether the good is a luxury or a necessity.

Question

Quizplus · Accepted Answer

The adjustment time is a determinant that affects both the price elasticity of supply and the price elasticity of demand. When a good has a more elastic supply and demand, it is easier for producers and consumers to adjust to changes in price, respectively, whereas when a good has a more inelastic supply and demand, it is more difficult for producers and consumers to adjust to price changes. Therefore, the longer the adjustment time, the more inelastic supply and demand are.

A Determinant of the Price Elasticity of Supply That Is