C4S4 - What is Elasticity of Demand?

Elasticity of supply measures how responsive

• consumers are to price change

• government is to price change

• producers are to price change

• workers are to price change

Which of the following examples demonstrates elastic supply?

• The price of submarine sandwiches rises 50 percent; the quantity supplied by the deli rises 30 percent.

• Gasoline prices rise from $1.50 to $3.00 a gallon, and refineries increase production 10 percent.

• Nurseries cut the price of rose bushes in half, but because the bushes are two years old, supply remains fixed.

• A CD fails to be a hit, stores discount it by 30 percent, and the recording company lowers production by 50 percent.

What is the most common reason for supply to be inelastic?

• the difficulty of changing the amount produced

• the lack of competition among producers

• the amount of government regulation

• the lack of demand among consumers

Which of the following is most likely to have elasticity of supply for their product?

• apple grower

• car manufacturer

• electronics manufacturer

• wedding-cake baker

What do both elasticity of demand and elasticity of supply measure?

• responsiveness to price

• responsiveness to quantity

• desires of consumers

• desires of producers