Flashcards on Economic Elasticity Concepts and Applications
Economic Elasticity: Concepts, Applications & Calculations
Tap to flip · Swipe to navigate
Price elasticity of supply
16 cards
Card 1
Question: What is the price elasticity of supply (PES) value for unitary price elastic supply and what does it mean?
Answer: PES = 1. A given percentage change in price results in an equal percentage change in quantity supplied.
Card 2
Question: What does perfectly price inelastic supply mean and what is its PES value?
Answer: PES = 0. A change in price has no impact on the quantity supplied.
Card 3
Question: Give three examples of goods or supplies that can be perfectly price inelastic.
Answer: The supply of land; antiques or one‑of‑a‑kind items; skilled labour in the short run.
Card 4
Question: What is perfectly price elastic supply and what is its PES value?
Answer: PES = ∞. The supply of a product at a particular price is infinite; a price decrease drops supply to zero while a price increase still yields infinite
Card 5
Question: How does spare industry capacity affect the price elasticity of supply?
Answer: Spare production capacity makes supply more elastic because producers can easily expand production using idle resources like machinery.
Card 6
Question: How does the availability of inputs influence the price elasticity of supply?
Answer: If inputs are scarce supply is inelastic because quantity supplied cannot increase much regardless of price changes.
Card 7
Question: How does the level of employment affect supply elasticity?
Answer: Supply is inelastic at full employment because production can't easily increase in the short term; improving productivity affects long‑term supply mor
Card 8
Question: Why might local market supply be more elastic if inputs can be imported?
Answer: Because imported inputs allow producers to increase production more easily when prices rise, making supply more elastic locally.
Card 9
Question: How does the ability to store goods (stock hoarding) affect supply elasticity?
Answer: Storage ability makes supply more elastic: producers can release stored goods to increase supply when prices rise and hold back supply when prices fal
Card 10
Question: Why are many agricultural goods price inelastic in the short run?
Answer: Quantity supplied is limited by land planted and growth time; products that take long to mature or herds that can't be quickly expanded make supply in