Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Producers will significantly increase the quantity supplied.
B
Producers will decrease the quantity supplied.
C
Producers will not change the quantity supplied at all.
D
Producers will only slightly increase the quantity supplied.
Understanding the Answer
Let's break down why this is correct
Answer
When a good has a price elasticity of supply greater than one, it means that producers can respond quickly to changes in price. Specifically, if the price of the good increases, producers will increase their production by a larger percentage than the price increase. For example, if the price of a product rises by 10%, and the producers increase their supply by 20%, the price elasticity of supply is 2, which is greater than one. This shows that producers are very responsive and can adjust their output easily, perhaps because they have the resources and capacity to do so. Therefore, a high price elasticity of supply indicates that producers are likely to take advantage of higher prices by producing more of the good.
Detailed Explanation
When the price goes up, producers can quickly make more of the good. Other options are incorrect because This option suggests that producers will make less, which is not true; This option implies that producers will not change their output at all.
Key Concepts
Price Elasticity of Supply
Market Behavior of Producers
Price Changes
Topic
Price Elasticity of Supply
Difficulty
easy level question
Cognitive Level
understand
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