Elasticity of supply - examples and MCQs for CSEET
ChatGPT
Elasticity of Supply:
Definition: Elasticity of supply measures how responsive the quantity supplied of a good or service is to changes in its price. It helps us understand how producers react to shifts in market conditions.
Types of Elasticity:
Elastic Supply: When the percentage change in quantity supplied is greater than the percentage change in price (∣Es∣>1∣Es∣>1). Producers are highly responsive to price changes.
Example: Handcrafted, specialized goods with skilled artisans.
Inelastic Supply: When the percentage change in quantity supplied is less than the percentage change in price (∣Es∣<1∣Es∣<1). Producers are less responsive to price changes.
Example: Limited resources or highly regulated industries.
Unitary Elasticity: When the percentage change in quantity supplied is equal to the percentage change in price (∣Es∣=1∣Es∣=1).
Factors Influencing Elasticity:
Time Horizon: Supply tends to be more elastic over a longer time period.
Availability of Inputs: If inputs are easily accessible, supply may be more elastic.
Production Flexibility: The ability to switch production to other goods influences elasticity.
Elasticity Formula: Elasticity of Supply (Es)=% Change in Quantity Supplied% Change in PriceElasticity of Supply (Es)=% Change in Price% Change in Quantity Supplied
Examples:
Elastic Supply Example:
If the price of a specific type of software increases, and programmers can quickly adapt their skills to produce more, it shows elastic supply.
Inelastic Supply Example:
In the short term, the supply of rare minerals may be inelastic because it's challenging to increase production rapidly.
Multiple Choice Questions:
1. What does elasticity of supply measure?
A. Responsiveness of quantity demanded to price changes.
B. Responsiveness of quantity supplied to price changes.
C. Consumer preferences for goods.
D. Market competition.
Answer: B
2. When is supply considered elastic?
A. When ∣Es∣>1∣Es∣>1.
B. When ∣Es∣<1∣Es∣<1.
C. When ∣Es∣=1∣Es∣=1.
D. When ∣Es∣∣Es∣ is undefined.
Answer: A
3. What is the characteristic of inelastic supply?
A. ∣Es∣>1∣Es∣>1.
B. ∣Es∣<1∣Es∣<1.
C. ∣Es∣=1∣Es∣=1.
D. No responsiveness to price changes.
Answer: B
4. Which factor influences elasticity by making supply more elastic?
A. Availability of substitutes.
B. Market competition.
C. Time horizon.
D. Production flexibility.
Answer: D
5. In the formula for elasticity of supply, what does Es represent?
A. Elasticity of supply.
B. Change in price.
C. Change in quantity supplied.
D. Time horizon.
Answer: A
6. When is supply considered inelastic?
A. When ∣Es∣>1∣Es∣>1.
B. When ∣Es∣<1∣Es∣<1.
C. When ∣Es∣=1∣Es∣=1.
D. When there are no substitutes.
Answer: B
7. What is unitary elasticity in supply?
A. ∣Es∣>1∣Es∣>1.
B. ∣Es∣<1∣Es∣<1.
C. ∣Es∣=1∣Es∣=1.
D. ∣Es∣∣Es∣ is undefined.
Answer: C
8. What factor makes a good a candidate for elastic supply?
A. Necessity.
B. Availability of substitutes.
C. Short time horizon.
D. Limited production flexibility.
Answer: B
9. Which type of goods tend to have elastic supply?
A. Necessities.
B. Inferior goods.
C. Luxury goods.
D. Substitutable goods.
Answer: C
10. How does time horizon affect elasticity of supply?
A. Longer time horizon makes supply more elastic.
B. Longer time horizon makes supply more inelastic.
C. Time horizon has no impact on elasticity.
D. Time horizon makes supply unitary elastic.
Answer: A
11. If the percentage change in quantity supplied is greater than the percentage change in price, what type of supply is it?
A. Inelastic supply.
B. Elastic supply.
C. Unitary elasticity.
D. No responsiveness.
Answer: B
12. What does a high availability of inputs do to the elasticity of supply?
A. Makes supply more elastic.
B. Makes supply more inelastic.
C. Has no impact on elasticity.
D. Makes supply unitary elastic.
Answer: A
13. What is the characteristic of unitary elasticity in supply?
A. ∣Es∣>1∣Es∣>1.
B. ∣Es∣<1∣Es∣<1.
C. ∣Es∣=1∣Es∣=1.
D. ∣Es∣∣Es∣ is undefined.
Answer: C
14. What type of goods are often associated with inelastic supply?
A. Necessities.
B. Inferior goods.
C. Luxury goods.
D. Complementary goods.
Answer: A
15. What happens to the elasticity of supply if production flexibility is limited?
A. Makes supply more elastic.
B. Makes supply more inelastic.
C. Has no impact on elasticity.
D. Makes supply unitary elastic.
Answer: B
16. How is the elasticity of supply calculated?
A. Elasticity of Supply (Es)=Change in Quantity Supplied/Change in Price
B. Elasticity of Supply (Es)=% Change in Quantity Supplied/% Change in PriceE
C. Elasticity of Supply (Es)=Change in Quantity Demanded/Change in Price
D. Elasticity of Supply (Es)=% Change in Quantity Demanded / % Change in Price
Answer: B
17. What is the characteristic of elastic supply?
A. Increasing supply as price increases.
B. Decreasing supply as price increases.
C. No change in supply with price changes.
D. No substitutes available.
Answer: A
18. How does the availability of substitutes affect the responsiveness of supply?
A. Increases responsiveness.
B. Decreases responsiveness.
C. Has no impact on responsiveness.
D. Makes supply unitary elastic.
Answer: A
19. How does the elasticity of supply differ from the elasticity of demand?
A. They are the same concept.
B. Elasticity of supply measures responsiveness to quantity demanded.
C. Elasticity of demand measures responsiveness to price changes.
D. They are unrelated concepts.
Answer: C
20. Which type of elasticity is characterized by a percentage change in quantity supplied equal to the percentage change in price?
A. Elastic supply.
B. Inelastic supply.
C. Unitary elasticity.
D. Perfectly elastic supply.
Answer: C
Recent Posts
See All1. Chabahar Port, which was in the news recently, is located in which of the following countries? a. Pakistan b. Qatar c. UAE d. Iran ...
1. _____________ carry additional features which allow the preference shareholders to claim unpaid dividends of the years in which...
1. How many categories of fundamental rights are guaranteed under Part III of the Indian Constitution? a. Six b. Seven c. Eight d. Nine ...
