Chapter 3.3 Flashcards

1
Q

Price elasticity of supply

A

A measure of the responsiveness of the quantity of a good supplied to changes in its price

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2
Q

Price elasticity of supply formula

A

Percentage change in quantity of good supplied over percentage change in price

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3
Q

When is supply price inelastic?

A

When PES < 1

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4
Q

When is supply price elastic?

A

When PES > 1

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5
Q

When is supply unit elastic?

A

When PES = 1

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6
Q

When is supply perfectly inelastic?

A

When PES = 0

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7
Q

How can you tell there is unitary supply from a graph?

A

Supply curve passes through the origin

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8
Q

When is supply perfectly elastic?

A

When PES = infinity

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9
Q

Determinants of price elasticity of supply

A

Length of time
Mobility of factors of production
Spare capacity of firms
Ability to store stocks
Rate at which costs increase

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10
Q

Why do primary commodities have a lower PES than manufactured products?

A

The time needed for quantity supplied is usually much longer

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11
Q

Why do primary commodities have a higher PES in the long-term?

A

More time is given to make the adjustments and produce more

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