2.6 elasticity of supply

Question 1

Elasticity of supply

Answer 1

Measures how responsive the change in quantity supplied is to a change in price.

It is a quantitative indicator of producer responsiveness to price change.

Question 2

The values of PES

Answer 2

The values of PES are high or low depending on how fast producers can ramp up production when the price increases or scale it back when the price decreases.

Question 3

Determinants of PES(MRSAT)

Answer 3

1. Mobility of factors of production.
2. Rate at which costs of production increases.
3. Ability to store goods.
   4.spare capacity
   5.Time period

Question 4

1. Mobility of factors of production

Answer 4

How responsive are producers to switching/allocating recourses between products?their factors of production when price changes,

Question 5

2. Rate at which costs of production increases

Answer 5

The cost to produce each additional unit of output.

Question 6

Ability to store goods

Answer 6

If large inventories of goods can easily be stored in warehouses or kept on hand by producers, then the supply of the goods can be highly responsive to changes in the price.

Question 7

Spare capacity

Answer 7

Excess capacity refers to the amount a firm is able to produce in the short run without
having to expand its plant size and the amount of capital and land employed in production. If

If prices increase of good and there is capacity to produce more of good in factory then it is elastic.

Question 8

Time period

Answer 8

An important determinant of how responsive producers are to price changes is the
amount of time following a change in price over which producers are able to adjust
their output.

In shirt run producers have harder time to respond quickly to changes in prices(more elastic).

Question 9

The PES of primary commodities and manufactured goods.

Answer 9

Primary commodities= inelastic

Manufactures goods=elastic.