Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It decreases elasticity as producers cannot easily switch to alternatives.
B
It increases elasticity since producers can easily switch to alternatives.
C
It has no effect on elasticity regardless of market conditions.
D
It only affects elasticity in monopolistic markets.
Understanding the Answer
Let's break down why this is correct
Answer
In a competitive market, the availability of substitutes affects how quickly suppliers can respond to a price increase. When there are many substitutes for a product, suppliers may find it easier to switch their resources to produce those alternatives instead. This means that if the price of one product goes up, suppliers can quickly adjust their production to meet the new demand for substitutes, making the supply more elastic. For example, if the price of apples rises, farmers might choose to grow more pears instead if pears are readily available. Therefore, when substitutes are available, the overall price elasticity of supply tends to be higher, as suppliers can adapt more easily to changes in market prices.
Detailed Explanation
When substitutes are available, producers can easily switch to making those instead. Other options are incorrect because This answer suggests that producers can't change what they make; This answer claims that substitutes don't matter for elasticity.
Key Concepts
Determinants of price elasticity of supply
Market conditions
Price changes and supply response.
Topic
Price Elasticity of Supply
Difficulty
hard level question
Cognitive Level
understand
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