2.6 ELASTICITY OF SUPPLY

Question 1

PRICE ELASTICITY OF SUPPLY

Answer 1

A measure of how much the quantity supplied of good changes when there is a change in its price.

Question 2

PES

Answer 2

PES= % CHANGE IN QUANTITY SUPPLIED OF GOOD X

Question 3

DETERMINANTS OF PES

Answer 3

1. TIME
2. MOBILITY/FLEXIBILITY OF PRODUCTION
3. UNUSED CAPACITY
4. STORAGE ABILITY
5. RATE OF PRODUCTION COSTS

Question 4

PRIMARY COMMODITY

Answer 4

Raw Materials and food such as Agriculture, Gold, Oil, Diamonds

Question 5

MANUFACTURED GOOD

Answer 5

CLOTHES, MACHINERY, CARS

Question 6

PRIMARY COMMODITIES PED

Answer 6

Primary Commodities are often necessities with no close substitutes resulting in inelastic demand.

Question 7

PRIMARY COMMODITIES PES

Answer 7

Due to the high investment and long periods of work, primary commodities typically have a low PES (inelastic supply) compared to manufactured goods.