01
Front
What does price elasticity of supply measure?
Back
Price elasticity of supply measures how responsive the quantity sellers offer is to a change in price, with other conditions unchanged.
Free Online Flashcard Deck
2 Price Elasticity of Supply Free Online FlashCards
Study 2 Price Elasticity of Supply with 12 free online flashcards. Review key terms, definitions, and concepts with this interactive flashcard deck.
12 cards
02
Front
What does elastic supply mean?
Back
Supply is elastic when quantity supplied changes by a larger percentage than price: Es>1.
03
Front
How does the midpoint method find percentage changes?
Back
For each variable, divide its change by the average of its starting and ending values, then multiply by 100: %ΔQs=(Q1+Q2)/2Q2−Q1×100, and likewise for price.
04
Front
What does a calculated supply elasticity estimate describe?
Back
The estimate describes responsiveness between the measured observations; it does not guarantee the same response to every price change.
05
Front
How does more time to adjust affect supply elasticity?
Back
Supply is generally more elastic when sellers have more time to respond, because they can adjust production or new firms can enter.
06
Front
How is price elasticity of supply calculated?
Back
It is the percentage change in quantity supplied divided by the percentage change in price: Es=%ΔP%ΔQs.
07
Front
Why does supply elasticity have no units?
Back
It has no units because it is a ratio of percentage changes.
08
Front
When is supply unit elastic?
Back
Supply is unit elastic when quantity supplied and price change by the same percentage: Es=1.
09
Front
What does inelastic supply mean?
Back
Supply is inelastic when quantity supplied changes by a smaller percentage than price: 0<Es<1.
10
Front
When is supply perfectly inelastic?
Back
Supply is perfectly inelastic when quantity supplied does not respond to price: Es=0.
11
Front
Why use the midpoint method for two observations?
Back
It uses the average of the starting and ending values, so it gives the same elasticity whichever direction the comparison is made.
12
Front
How does available production capacity affect supply responsiveness?
Back
Unused machines, workers, storage, or floor space can help a firm increase output quickly. A firm near capacity may need costly investment to expand much.
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