Introduction to Price Elasticity of Supply

The video tutorial explains the concept of price elasticity of supply, illustrating how supply responds to price changes. It covers the law of supply, reasons for upward-sloping supply curves, and provides examples of elastic and inelastic supply. The tutorial also details the formula for calculating price elasticity of supply and discusses scenarios to demonstrate different elasticity values.

What does the law of supply imply about the slope of supply curves?

• They are horizontal.

• They have a negative gradient.

• They are downward-sloping.

• They are upward-sloping.

How does an elastic good respond to a price increase compared to an inelastic good?

• It responds the same as an inelastic good.

• It does not respond at all.

• It responds more to a price increase.

• It responds less to a price increase.

What is one reason supply curves slope upwards?

• Profit incentives for entrepreneurs.

• Decreasing demand.

• Decreasing production costs.

• Fixed production costs.

What does the price elasticity of supply (PES) measure?

• The responsiveness of demand to supply changes.

• The change in demand when price changes.

• The responsiveness of supply to price changes.

• The change in supply when demand changes.

How is the price elasticity of supply (PES) calculated?

• Proportionate change in quantity supplied divided by proportionate change in price.

• Change in quantity supplied divided by change in price.

• Change in price divided by change in quantity supplied.

• Proportionate change in price divided by proportionate change in quantity supplied.

If a good has a PES value of 0.5, how is it classified?

• Elastic

• Inelastic

• Unit elastic

• Perfectly elastic

What does a PES value greater than 1 indicate?

• The good is unit elastic.

• The good is elastic.

• The good is perfectly inelastic.

• The good is inelastic.

What happens to the quantity supplied if the price of a good falls?

• It becomes zero.

• It decreases.

• It remains the same.

• It increases.

Why should a negative PES value be concerning?

• It shows a positive relationship between price and supply.

• It contradicts the law of supply.

• It indicates a direct relationship between price and supply.

• It is a normal occurrence.

What is the relationship between price and quantity supplied according to the law of supply?

• Inverse relationship

• Random relationship

• No relationship

• Direct relationship