Practice: Price Elasticity of Supply

Advanced: Price Elasticity of Supply

By Yannick Yu

​Pull out your calculators and a sheet of paper to calculate.

Multiple Choice

According to the law of supply, the coefficient (i.e. value) of price elasticity of supply has to be…

• Negative

• Positive

Multiple Choice

What is the percentage change in quantity supplied?

• 0.25

• 0.5

• 0.75

• 1

Multiple Choice

What is the percentage change in price?

• 0.25

• 0.5

• 0.75

• 1

Multiple Choice

What is the arc elasticity of supply of good X?

• 0.3

• 0.5

• 0.7

• 0.9

Multiple Choice

Which of the following shows that the supply of laptop computers is elastic?

• The quantity supplied of laptop computers increases when the price increases.

• The quantity supplied of laptop computers increases when there are more suppliers.

• The quantity supplied of laptop computers decreases when consumers’ income falls.

• The quantity supplied of laptop computers increases by 50% when the price increases by 30%.

Multiple Choice

Once the price of good X decreases, the quantity supplied of the good drops to zero immediately. The price elasticity of supply of the good is

• perfectly inelastic.

• perfectly elastic.

• unitary elastic.

• inelastic.

Multiple Select

Suppose the number of seats in the cinema is fixed. The current unit price of the movie tickets is P1. Which of the following statements are CORRECT?

• There is an excess supply of movie tickets.

• If the price of the movie tickets decreases, the total revenue of the cinema must increase.

• The demand for the movie tickets is elastic.

• The supply of the movie tickets is perfectly inelastic.

Open Ended

Compare the elasticity of supply of electricity supply and toy cars. Which one is more elastic? Why?

Open Ended

Compare the elasticity of supply of vegetable crops and cup noodles.

Multiple Choice

Which of the following can explain why the supply of domestic organic vegetables is inelastic?

• It is not difficult to enter the market of organic vegetables.

• There is a lot of spare farmland to grow organic vegetables.

• Highly specialised techniques are required for growing organic vegetables.

• People are not used to eating organic vegetables.

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