Price Elasticity of Supply

Question 1

Factors impacting supply

Answer 1

1. Material costs/Labour costs
2. Population changes
3. Natural disasters

Question 2

Price elasticity of supply=

Answer 2

Percentage change in quantity supplied of good X/percentage change in price of good X

Question 3

Price elasticiy of supply-

Answer 3

sensitivity/responsiveness of quantity supplied of a good or service to a change in that price of that good or service

Question 4

Profit satificer

Answer 4

Wanting satisfactory profits rather than maximum profits. They don’t mind if profit margins drop.

Question 5

Marker of if you’re profit maximising or not?

Answer 5

Where you are setting your prices at.

Question 6

Is housing elastic or inelastic?

Answer 6

Inelastic, because:
Takes a long time to build
Costs a lot of money
Low supply of labour force - to address this, more funding of building education(apprenticeships) will provide more skilled builders.
Lack of resources/raw materials - not enough money for imports
Lack of land available: planning policies must change - political issues with building new houses

Question 7

Government
promise on housing

Answer 7

By the end of 2029, they will have built 1.5 million new houses, but we have to see if they keep this promise or not.

Question 8

Growing avocados - supply elastic or inelastic?

Answer 8

Supply inelastic(takes a long time to grow trees, then the fruit, then for the fruit to ripe), limited stocks of avocados

Question 9

Is a ticket to watch Liverpool supply elastic or inelastic?

Answer 9

Perfectly inelastic:
Expensive
Stadium capacity limitation

Question 10

Supply will tend to be price elastic when:

Answer 10

1. Supplier has plenty of spare capacity to increase output(spare Labour, raw materials).
2. High stock levels are immediately available to meet rising demand.
3. There is a short production time frame to get extra production to the market.
4. Ease of factory substitution is high(resources can be reallocated easily).

Question 11

Buffer stocks

Answer 11

Spare capacity to increase output: useful when there’s too much demand. Shops are most likely to keep buffer stocks during the holidays/Christmas time.

Question 12

Impact of selling dates

Answer 12

If we’re selling cans of beans(the sell by date is two years), we ignore sell by date.
Businesses sell these products anyway, as they know this is how ignorant consumers are.
For perishable products with a short span life, like milk, consumers always check the sell by date.

Question 13

Chancellor role -

Answer 13

Economist who decides the economic policy of the country(what happens with housing/taxes)