What does price elasticity of supply measure?
A How responsive price is to a change in quantity
B How responsive quantity supplied is to a change in supplied.
C How responsive price is to a change in quantity demanded.
D price. How responsive supply is to a change in price.
If the price elasticity of supply for copper wire is 0.83, then price elasticy of supply for copper wire
A perfectly inelastic.
B relatively elastic.
C perfectly elastic.
D relatively inelastic.
E unit elastic
The Correct Answer and Explanation is :
The correct answers to your questions are:
- D: How responsive supply is to a change in price.
- D: Relatively inelastic.
Explanation:
- Price Elasticity of Supply (PES) measures how much the quantity supplied of a good changes in response to a change in its price. It tells us how sensitive producers are to price changes. The formula for price elasticity of supply is: PES=% Change in Quantity Supplied% Change in PricePES = \frac{\%\ \text{Change in Quantity Supplied}}{\%\ \text{Change in Price}} If the price elasticity of supply is greater than 1, supply is said to be elastic, meaning that producers are highly responsive to price changes. If PES is less than 1, supply is inelastic, meaning producers are less responsive to price changes. A value of 1 indicates unit elastic supply, where the percentage change in quantity supplied is equal to the percentage change in price. In your question, the correct answer is D, because price elasticity of supply measures how responsive the supply of a good is to a change in price. This is the defining feature of PES.
- Interpreting PES for Copper Wire: If the price elasticity of supply for copper wire is 0.83, this indicates that the supply of copper wire is relatively inelastic. A PES less than 1 means that the quantity supplied doesn’t respond strongly to price changes. In this case, producers of copper wire do not significantly increase or decrease supply in response to price fluctuations. This is typical for goods that are difficult to produce in short timeframes or where capacity is constrained (e.g., mining copper ore or manufacturing copper wire).
- Perfectly inelastic (PES = 0): No change in quantity supplied, no matter the price.
- Perfectly elastic (PES = ∞): Any price change leads to an infinite change in quantity supplied.
- Relatively inelastic (PES < 1): Quantity supplied changes, but less than proportionally to the price change.
- Relatively elastic (PES > 1): Quantity supplied changes more than proportionally to the price change.
- Unit elastic (PES = 1): Quantity supplied changes in exact proportion to the price change.