Multiple Choice
If a one percent decrease in the price of a pound of pound cake causes a three percent decrease in the quantity of pound cake supplied:
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4. Elasticity
Price Elasticity of Supply
Multiple Choice
Which of the following scenarios is likely to make the supply of Maine lobsters more elastic?
A
Lobsters requiring a longer time to reach maturity before they can be harvested.
B
A decrease in the number of lobster fishers due to unfavorable weather conditions.
C
Advancements in lobster fishing technology that allow fishers to quickly increase their catch in response to price changes.
D
Strict government quotas that limit the total number of lobsters that can be harvested each season.
Verified step by step guidance1
Step 1: Understand the concept of price elasticity of supply, which measures how much the quantity supplied of a good responds to a change in its price. A more elastic supply means producers can increase output quickly when prices rise.
Step 2: Analyze each scenario to see how it affects the ability of lobster fishers to adjust their quantity supplied in response to price changes.
Step 3: Recognize that if lobsters take a longer time to mature, fishers cannot quickly increase supply, making supply less elastic.
Step 4: Note that a decrease in the number of fishers reduces the capacity to increase supply, also making supply less elastic.
Step 5: Identify that advancements in fishing technology enable fishers to catch more lobsters quickly when prices rise, increasing supply responsiveness and thus making supply more elastic.
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