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
If the price elasticity of supply for a product is greater than 1, it means that the supply of that product is very responsive to changes in price. This means that if the price increases, suppliers will produce significantly more of the product. For example, if the price of oranges rises, orange farmers might quickly grow more oranges or harvest more from their trees to take advantage of the higher price. This situation often occurs with products that can be produced or adjusted easily, like clothing or electronics. In contrast, if the price were to fall, suppliers would decrease production quickly to avoid losses.
Detailed Explanation
When the price elasticity of supply is greater than 1, it means that suppliers can easily change how much they produce when prices go up or down. Other options are incorrect because This answer suggests that suppliers do not change their production much when prices change; This option says supply changes equally with price changes.
Key Concepts
price elasticity of supply
Topic
Elasticity in Market Dynamics
Difficulty
easy level question
Cognitive Level
understand
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