Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Supply is elastic, meaning quantity supplied changes significantly with price changes.
B
Supply is inelastic, meaning quantity supplied changes little with price changes.
C
Supply is unit elastic, meaning quantity supplied changes equally with price changes.
D
The product is a luxury good, and demand is high.
Understanding the Answer
Let's break down why this is correct
Answer
When the price elasticity of supply for a product is greater than 1, it means that the supply of that product is considered elastic. This indicates that producers can significantly increase their production when the price rises, responding quickly to changes in market demand. For example, if the price of T-shirts goes up, manufacturers may quickly ramp up production by hiring more workers or using more materials because they see an opportunity to make more profit. This flexibility in supply can lead to larger changes in quantity supplied compared to the change in price. Overall, a supply elasticity greater than 1 shows that producers are able and willing to adjust their output in response to price changes.
Detailed Explanation
When the price elasticity of supply is greater than 1, it means that producers can quickly change how much they supply when prices change. Other options are incorrect because This option suggests that supply does not change much with price; This option implies that supply changes exactly with price.
Key Concepts
price elasticity of supply
Topic
Elasticity in Market Dynamics
Difficulty
easy level question
Cognitive Level
understand
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