Key Determinants of Supply Elasticity

Question 1

TIME (explain elastic)

Answer 1

elastic:
if producer responds quickly to price change
a time increase = producers have more time to obtain inputs therefore outputs expand more easily = more elastic

Question 2

TIME (explain inelastic)

Answer 2

inelastic:

if producer responds slowly to price change

Question 3

explain the example of oil (to do with TIME inelastic and elastic)

Answer 3

Short Term = usually oil price is fixed, there is a known quantity of oil reserves which means relatively inelastic
Long Term = exploration/discovery can increase quantity of oil sold which means relatively more elastic

Question 4

NATURE OF INDUSTRY (explain elastic)

Answer 4

Manufactured Products - supply with be elastic

• easy to mass produce products (ipads, laptops, phones)
• if selling price increases, firms can quickly expand output

Question 5

NATURE OF INDUSTRY (explain inelastic)

Answer 5

agricultural products - supply will be inelastic

• products that take up to 12 months to create (wheat, wool, meat)
• if wheat price increases, farmers cannot quickly respond, they have to wait for the next season

Question 6

ABILITY TO STORE INVENTORIES (explain elastic + example)

Answer 6

elastic supply - able to store goods for future (to respond quicker)
- supermarket non perishables shipped out when store runs out

Question 7

ABILITY TO STORE INVENTORIES (explain inelastic + example)

Answer 7

inelastic supply - unable to store goods ( have to make more) therefore slow response
- perishables (fresh/fruit/veg) cannot be stored