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Price Elasticity of Supply quiz

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  • What does price elasticity of supply measure?
    It measures how much the quantity supplied responds to a change in price.
  • In the price elasticity of supply formula, which variable is in the numerator?
    Quantity supplied is in the numerator.
  • Why is the value of price elasticity of supply always positive?
    Because according to the law of supply, both price and quantity supplied move in the same direction, making the ratio positive.
  • What calculation method is used for price elasticity of supply?
    The midpoint method is used, just like with price elasticity of demand.
  • What are the five steps to calculate price elasticity of supply using the midpoint method?
    Subtract the two quantities and prices, add the two quantities and prices, divide each sum by 2, calculate percentage changes, and divide the percentage change in quantity supplied by the percentage change in price.
  • If the price of ice cream rises from \$4 to \$6 and quantity supplied increases from 90,000 to 110,000, what is the price elasticity of supply?
    The price elasticity of supply is 0.5.
  • What does a price elasticity of supply less than 1 indicate?
    It indicates that supply is inelastic.
  • What does it mean if supply is inelastic?
    The percentage increase in quantity supplied is less than the percentage increase in price.
  • What is the formula for price elasticity of supply?
    It is the percentage change in quantity supplied divided by the percentage change in price.
  • How do you calculate the percentage change in quantity supplied using the midpoint method?
    Divide the difference in quantities by the average of the two quantities.
  • How do you calculate the percentage change in price using the midpoint method?
    Divide the difference in prices by the average of the two prices.
  • What is the value of price elasticity of supply if the percentage change in quantity supplied equals the percentage change in price?
    The price elasticity of supply is 1, which is called unit elastic.
  • What does it mean if the price elasticity of supply is greater than 1?
    It means supply is elastic.
  • Why do we not worry about positive or negative signs when calculating price elasticity of supply?
    Because the law of supply ensures both changes are positive, so the result is always positive.
  • What shorthand is used for price elasticity of supply in equations?
    It is often denoted as 'e_s' or elasticity of supply.