Management Notes

# Management Notes

Reference Notes for Management

# A key determinant of the price elasticity of supply is the

### A key determinant of the price elasticity of supply is the

A) how responsive buyers are to changes in sellers’ prices.
B) the slope of the demand curve.
C) the ability of sellers to change the amount of the good they produce.
D) the ability of sellers to change the price of the good they produce.

The Correct Answer for the given question is Option C) the ability of sellers to change the amount of the good they produce.

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## Price Elasticity of Supply FAQs

### What is the formula for measuring the price elasticity of supply?

Price elasticity of supply = % change in quantity supplied / % change in price.

### The price elasticity of supply measures how

Answer: how much quantity supplied changes in response to a change in the price.

### What are the determinants of the price elasticity of supply?

Answer: The determinants of elasticity of supply are as follows:

• Number of producers.
• Spare capacity.
• Effortlessness of switching.
• Ease of storage.
• Length of the period of production.
• The time frame of training.
• Mobility of factors.
• Reaction of costs.

### The law of supply suggests that the price elasticity of supply is

a) Always less than 1
b) Positive
c) Always greater than 1
d) Negative

### The price elasticity of supply for a product will be 2 if a

a)  1 percent decrease in price causes a 2 percent decrease in quantity supplied
b) 1 percent decrease in the price causes a 0.2 percent decrease in quantity supplied
c) 2 percent decrease in price causes a 1 percent decrease in quantity supplied
d) 2 percent decrease in price causes a 2 percent decrease in quantity supplied

Answer: a)  1 percent decrease in price causes a 2 percent decrease in quantity supplied.

### The price elasticity of supply when supply is perfectly inelastic is

Answer: PES = 0 ( There is no change in quantity if prices change.)

### If the price elasticity of supply is 1.2, and price increased by 5%, quantity supplied would

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