A-Level - Price Elasticity of Supply

The price elasticity of supply is:

• A. the change in supply given a change in price.

• B. how the price changes given a change in quantity supplied.

• C. the change in quantity supplied given a change in price.

• D. the percentage change in quantity supplied given a percentage change in price.

The price of a product falls from $5 to $4.

As a result, its supply in a given time period falls from 800 units to 700 units.

What is the PES?

• A. 0.71

• B. 0.625

• C. 1.6

• D. 0.5

A firm supplies 10 units of a product at $48 per unit.

If the PES is 4, how many units will the firm supply at a price of $60 per unit?

• A. 10

• B. 20

• C. 40

• D. 60

Which of these estimates of PES is most likely to apply to the supply of raw coffee beans?

• A. 0.1

• B. 1

• C. 1.1

• D. 10

The short-run supply of fresh flowers for export from Kenya

to the UK is less price elastic than the supply of green beans.

Why is this?

• A. The price of cut flowers fluctuates more than the price of green beans.

• B. Fresh flowers are purchased for special occasions.

• C. Fresh flowers only last a few days.

• D. Fresh flowers cannot be stored for as long as green beans.

Which of these products is most likely to have a perfectly elastic PES?

• A. seats to watch athletics finals at the Olympic Games

• B. an original painting by the famous French artist Monet

• C. music downloads to an electronic device

• D. a limited edition Hublot wristwatch

In very hot weather, an ice cream manufacturer decides to increase the price of its product by 10%.

It is able to increase production by 6% one week after the price increase was announced.

How can the PES be described?

• A. elastic

• B. inelastic

• C. perfectly elastic

• D. perfectly inelastic

What is the key characteristic of a product with a perfectly inelastic price elasticity of supply (PES)?

• A. Producers can easily adjust production quantities

• B. The PES value is equal to 1

• C. Consumers are highly responsive to price changes

• D. Quantity supplied remains constant regardless of price changes

A technological innovation leads to a significant increase in the production capacity of a product with elastic supply. How might this impact the stakeholders involved?

• A. Producers' revenue will decrease

• B. Consumers will benefit from lower prices

• C. Producers will reduce their production

• D. Consumers' demand will become less elastic

A product has a price elasticity of supply (PES) of 0.2.

How might this impact producers during a sudden surge in demand?

• A. producers will increase output a little

• B. producers will gain substantial revenue

• C. producers will find it difficult to increase production

• D. producers will lower production to maintain scarcity