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the price elasticity of supply is A. Perfectly inelastic B. Elastic C. Unitary D. Inelastic E. Perfectly elastic

Question

The price elasticity of supply is

A. Perfectly inelastic
B. Elastic
C. Unitary
D. Inelastic
E. Perfectly elastic

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Solution

To determine the price elasticity of supply, we need to understand the relationship between the percentage change in quantity supplied and the percentage change in price. Here are the steps to identify each type of elasticity:

  1. Perfectly Inelastic (A): The quantity supplied does not change at all when the price changes. The supply curve is vertical. The price elasticity of supply is 0.

  2. Elastic (B): The percentage change in quantity supplied is greater than the percentage change in price. The price elasticity of supply is greater than 1.

  3. Unitary (C): The percentage change in quantity supplied is equal to the percentage change in price. The price elasticity of supply is exactly 1.

  4. Inelastic (D): The percentage change in quantity supplied is less than the percentage change in price. The price elasticity of supply is between 0 and 1.

  5. Perfectly Elastic (E): The quantity supplied changes infinitely with any small change in price. The supply curve is horizontal. The price elasticity of supply is infinite.

To identify the correct option, you need to analyze the specific context or data provided regarding the changes in quantity supplied and price.

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