Question
If supply is price inelastic, the value of the price elasticity of supply must be
a. zero
b. less than 1
c. greater than 1
d. infinite
e. none of the answer choices
a. zero
b. less than 1
c. greater than 1
d. infinite
e. none of the answer choices
Ask by Guerrero Mathis. in the United States
Jan 27,2025
Upstudy AI Solution
Tutor-Verified Answer
Answer
If supply is price inelastic, the price elasticity of supply must be less than 1.
Solution
When supply is price inelastic, it means that the quantity supplied responds only slightly to changes in price.
The price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price.
- Inelastic Supply: If the absolute value of the price elasticity of supply is less than 1, it indicates that the supply is inelastic. This means that producers are not very responsive to price changes.
Therefore, the correct answer is:
b. less than 1
Answer: b. less than 1
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Simplify this solution Mind Expander
When supply is price inelastic, it means that producers cannot significantly increase the quantity supplied when there is a change in price. Therefore, the value of the price elasticity of supply must be less than 1. This indicates a relatively steep supply curve, where quantity supplied responds less to price changes.
In real-world scenarios, price inelastic supply often occurs in markets where production capacities are constrained, such as agricultural products immediately after harvest. For instance, if farmers experience a price increase due to high demand, they might not be able to produce significantly more crops immediately since they are limited by factors like land and growing seasons.
