Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
elastic
B
inelastic
C
unit elastic
D
perfectly inelastic
Understanding the Answer
Let's break down why this is correct
Answer
If the price elasticity of supply is greater than one, it is considered elastic. This means that when the price of a good increases, suppliers are able to increase the quantity they produce and sell by a larger percentage than the price increase. For example, if the price of oranges rises by 10% and suppliers can increase their output by 15%, the supply is elastic because the percentage change in quantity supplied is greater than the percentage change in price. Suppliers are responsive to price changes, which often happens in industries where production can be quickly adjusted, like farming or manufacturing. Understanding elasticity helps businesses make better decisions about how much to produce when prices change.
Detailed Explanation
When the price elasticity of supply is greater than one, it means that suppliers can easily change how much they produce when prices go up or down. Other options are incorrect because Some might think inelastic means suppliers can change their production easily; Unit elastic sounds like it means a balanced response, but it actually means the supply changes exactly as much as the price.
Key Concepts
Price Elasticity of Supply
Market Behavior
Producer Response
Topic
Price Elasticity of Supply
Difficulty
medium level question
Cognitive Level
understand
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