What is the definition of price elasticity of supply (PES)?
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A. The definition of PES is the degree to which the quantity supplied of a good responds to a change in the price of that good. Option B describes price elasticity of demand, not supply.
Which formula is used to calculate the price elasticity of supply (PES)?
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A. The formula for PES is (% change in quantity supplied) / (% change in price). Option B is the formula for price elasticity of demand.
If the price of a good increases from £5 to £7 and the quantity supplied increases from 100 units to 140 units, what is the PES?
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C. The PES is 2.0. The % change in quantity supplied is (140-100)/((140+100)/2) = 40%. The % change in price is (7-5)/((7+5)/2) = 40%. PES = 40%/40% = 1.0. The correct answer is not listed, but the closest option is C, which would imply a more elastic supply than calculated.
Which of the following is likely to have a highly elastic supply in the short run?
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A. A farmer selling fresh vegetables is likely to have a highly elastic supply in the short run, as they can quickly adjust the quantity supplied based on price changes. The other options are likely to have more inelastic supplies in the short run due to the time it takes to produce their goods.
Which of the following is likely to have an inelastic supply in the long run?
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D. A diamond miner is likely to have an inelastic supply in the long run, as the quantity supplied cannot be easily adjusted due to the time and cost of extracting diamonds. The other options are likely to have more elastic supplies in the long run as they can adjust production levels over time.
If the supply of a good is perfectly inelastic, what is the PES?
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A. If the supply of a good is perfectly inelastic, the PES is 0, as the quantity supplied does not change in response to price changes.
If the supply of a good is perfectly elastic, what is the PES?
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C. If the supply of a good is perfectly elastic, the PES is infinity, as the quantity supplied changes infinitely in response to price changes.
Which of the following is a determinant of PES?
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A. The availability of spare capacity is a determinant of PES, as firms with spare capacity can increase production more easily in response to price changes. The other options are not determinants of PES.
Which of the following is likely to have a more elastic supply in the long run than in the short run?
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B. A car manufacturer is likely to have a more elastic supply in the long run than in the short run, as they can adjust production levels and invest in new capacity over time. The other options are likely to have similar elasticities in the short and long run.
If the PES for a good is 0.5, what does this mean?
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B. If the PES for a good is 0.5, this means that the quantity supplied is not very responsive to price changes, as the percentage change in quantity supplied is less than the percentage change in price.
Which of the following is an example of a good with an inelastic supply in the short run?
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D. A concert ticket seller is an example of a good with an inelastic supply in the short run, as the quantity supplied cannot be easily adjusted once tickets have been printed and sold. The other options are likely to have more elastic supplies in the short run.
If the price of a good decreases from £10 to £8 and the quantity supplied decreases from 200 units to 160 units, what is the PES?
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B. The PES is 1.0. The % change in quantity supplied is (160-200)/((160+200)/2) = -20%. The % change in price is (8-10)/((8+10)/2) = -20%. PES = -20%/-20% = 1.0.
Which of the following is likely to have a more elastic supply if the good can be stored for long periods of time?
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C. Wheat is likely to have a more elastic supply if it can be stored for long periods of time, as the quantity supplied can be adjusted based on price changes and storage levels. The other options are perishable goods with more inelastic supplies.
If the supply of a good is unit elastic, what is the PES?
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B. If the supply of a good is unit elastic, the PES is 1, as the percentage change in quantity supplied is equal to the percentage change in price.
Which of the following is an example of a good with an elastic supply in the long run?
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B. A car manufacturer is an example of a good with an elastic supply in the long run, as they can adjust production levels and invest in new capacity over time in response to price changes. The other options are likely to have more inelastic supplies in the long run.
If the PES for a good is 2.0, what does this mean?
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A. If the PES for a good is 2.0, this means that the quantity supplied is highly responsive to price changes, as the percentage change in quantity supplied is greater than the percentage change in price.