1.2 Price Elasticity of Supply (PES)

Price elasticity of supply is the responsiveness of

• demand to a change in price.

• price to a change in supply.

• quantity supplied to a change in price.

• price to a change in supply.

Factory owner Susan has calculated that her PES is 3. This number means that,

• if price were to rise by 2% Susan would supply 6% more products.

• If price were to rise by 2% Susan would supply 3% more products.

• the percentage change in price is three times the percentage change in quantity.

• in the PES formula, the top number is smaller than the bottom number.

The PES for wheat in a given country

• is less elastic the longer the time period in question.

• is more elastic the more substitutes there are for wheat.

• is greater the more wheat there is in storage.

• will be higher if there are restrictions on wheat imports.

If the supply curve of a product is vertical, PES is equal to

• 0.

• 1.

• -1.

• infinity.

The supply of agricultural goods is

• relatively inelastic while the supply of manufactured goods is relatively elastic.

• relatively elastic while the supply of manufactured goods is relatively inelastic.

If storage of a good is cheap and readily available, supply is likely to be

• relatively elastic.

• relatively inelastic.

• perfectly inelastic.

• perfectly elastic.

The mining boom in created a shortage of labour in the hospitality industry in WA. This made the supply of restaurant meals in WA

• perfectly inelastic.

• more elastic.

• perfectly elastic.

• less elastic.

If the price of a product doubled and in response the quantity supplied also doubled then the PES is equal to

• 1

• -1

• 2

• o

Suppose the current price of barley is $7 per bushel and at that price 100,000 bushels are grown by a Colorado farmer. If the price of barley rises to $8 and quantity supplied increases to 130,000 bushels, then at the midpoint between these two prices, the price elasticity of supply for barley equals

• 13.33

• 1.96

• 0.51

• 26.78

Jess owns a sandwich shop. The price of a sandwich recently increased from $5 to $7. Jess responded by increasing the quantity of sandwiches she supplied from 70 to 90 per day. Then, at the midpoint between these two prices, Jess's price elasticity of supply is equal to

• 1.33

• 0.75

• 3.00

• 1.50