Which of the following values of price elasticity of supply suggests that it might be difficult to acquire the inputs used to make the good?

Choose 1 answer:
(A) 0.2
(B) 1
(C) 100
(D) $\infty$
(E) 5

Question

Which of the following values of price elasticity of supply suggests that it might be difficult to acquire the inputs used to make the good?

Choose 1 answer:
(A) 0.2
(B) 1
(C) 100
(D) $\infty$
(E) 5

Accepted Answer

∻Solution∻ ‖ a ⋮ Definition of Price Elasticity of Supply: The price elasticity of supply (PES) measures the responsiveness of the quantity supplied of a good to a change in its price. It is calculated as $PES = \frac{\% \Delta Q_s}{\% \Delta P}$, where $\% \Delta Q_s$ is the percentage change in quantity supplied and $\% \Delta P$ is the percentage change in price. ‖ ‖ b ⋮ Interpretation of PES Values: A PES value less than 1 indicates inelastic supply, meaning the quantity supplied is not very responsive to price changes. A PES value greater than 1 indicates elastic supply, meaning the quantity supplied is very responsive to price changes. ‖ ‖ c ⋮ Difficulty of Acquiring Inputs: A low PES value (close to 0) suggests that it is difficult to increase production in response to price increases, often due to difficulties in acquiring necessary inputs. ‖ ‖ d ⋮ Answer Selection: Among the given options, a PES value of 0.2 (Option A) is the lowest, indicating the most inelastic supply and suggesting difficulty in acquiring inputs. ‖ ∻Answer∻ ⚹ (A) 0.2 ⚹ ∻Key Concept∻ ⚹ Price Elasticity of Supply (PES) ⚹ ∻Explanation∻ ⚹ A PES value of 0.2 indicates that the supply is highly inelastic, meaning that the quantity supplied does not respond significantly to price changes. This often implies that it is difficult to acquire the inputs needed to increase production. ⚹◊How does the price elasticity of supply impact the availability of inputs used to make a good in the market?⍭ Generate me a similar question◊

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