Economics - Elasticity - PES

Why does the supply curve slope upwards? Pick two reasons below.

• When price falsl the quantity demanded of a commodity rises and vice versa, other things remaining the same.

• Reflects the higher price needed to cover the higher marginal cost of production.

• Profit motive: market price rises following an increase in demand, so it becomes more profitable for businesses to increase output.

• New firms may be attracted into a market because of the expectation of profits.

Which of these statements is true?

• There is an inverse relationship between price and demand

• There is a positive relationship between price and supply

• There is a positive relationship between price and supply

• There is an inverse relationship between price and demand

Definition of price elasticity of supply:

The ................... of quantity supplied to a change in price.

The equation for PES is which?

• 
  

  $\%\ Change\ in\ quantity\ demanded\ \div\ \%\ Change\ in\ price$
  

• $\%\ Change\ in\ quantity\ demanded\ \div\%\ Change\ in\ income$

• $\%\ Change\ in\ quantity\ \sup plied\ \ \div\%\ Change\ in\ price$

• $\%\ Change\ in\ quantity\ demanded\ of\ good\ X\ \div\%\ Change\ in\ price\ of\ good\ Y$

If a good has a PES of 1.5, then a change in price of 10% will lead to what change in quantity produced?

• 1.5%

• 15%

• 155%

A good with a PES of less than 1 is said to be what?

• Elastic / responsive

• Unitary / equally responsive

• Inelastic / unresposive

A firm´s elasticity of supply is typically governed by one major factor. Which one?

• Labour

• Time

• Demand

• Prices

Which three factors of the following impact PES?

• Spare capacity for production

• Demand

• Factor mobility

• Prices

• Stocks

The fixed capacity of a football stadium (in the short to medium term) is a good example of what?

• Perfectly elastic supply

• Perfectly inelastic supply