Multiple Choice
Given that the price elasticity of supply for oranges is 1.5 and 1,000 oranges are supplied per week at \$1.50 per orange, how many oranges will be supplied per week at \$2.00 per orange?
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4. Elasticity
Price Elasticity of Supply
Multiple Choice
The longer the time period considered, the more the elasticity of supply tends to:
A
increase
B
decrease
C
remain unchanged
D
become perfectly inelastic
Verified step by step guidance1
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. It is calculated as the percentage change in quantity supplied divided by the percentage change in price, expressed as \(\text{Elasticity of Supply} = \frac{\% \Delta Q_s}{\% \Delta P}\).
Recognize that the time period is a crucial factor affecting elasticity of supply because it determines how easily producers can adjust their production levels in response to price changes.
In the short run, producers have limited ability to change the quantity supplied due to fixed inputs or production capacity, so supply tends to be more inelastic (less responsive to price changes).
In the long run, producers can adjust all inputs, enter or exit the market, and adopt new technologies, making supply more responsive to price changes, which means the elasticity of supply tends to increase.
Therefore, the longer the time period considered, the more elastic the supply becomes, as producers have more flexibility to adjust their production.
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