2.7 Price Elasticity of Supply Flashcards
1
Q
What is meant by stocks in relation to supply?
A
If a firm has a low stock level, it will not be able to respond quickly to changes in price. In this case supply would be fairly inelastic. High stocks - Elastic
2
Q
What is meant by spare capacity in relation to supply?
A
If a firm is not using all of its resources in the production of the good or service they are working below their capacity. When there is spare capacity supply is very responsive to a change in price.
3
Q
What is meant by production lags in relation to supply?
A
How long it takes to produce something. Long production period = inelastic short = Elastic.
4
Q
What is meant by substitutability of factors of production in relation to supply?
A
The more specialised the factors of production are the
