top of page

# Elasticity of supply - examples and MCQs for CSEET

ChatGPT

### Elasticity of Supply:

Definition: Elasticity of supply measures how responsive the quantity supplied of a good or service is to changes in its price. It helps us understand how producers react to shifts in market conditions.

Types of Elasticity:

1. Elastic Supply: When the percentage change in quantity supplied is greater than the percentage change in price (∣Es∣>1∣Es∣>1). Producers are highly responsive to price changes.

• Example: Handcrafted, specialized goods with skilled artisans.

1. Inelastic Supply: When the percentage change in quantity supplied is less than the percentage change in price (∣Es∣<1∣Es∣<1). Producers are less responsive to price changes.

• Example: Limited resources or highly regulated industries.

1. Unitary Elasticity: When the percentage change in quantity supplied is equal to the percentage change in price (∣Es∣=1∣Es∣=1).

Factors Influencing Elasticity:

1. Time Horizon: Supply tends to be more elastic over a longer time period.

2. Availability of Inputs: If inputs are easily accessible, supply may be more elastic.

3. Production Flexibility: The ability to switch production to other goods influences elasticity.

Elasticity Formula: Elasticity of Supply (Es)=% Change in Quantity Supplied% Change in PriceElasticity of Supply (Es)=% Change in Price% Change in Quantity Supplied​

### Examples:

1. Elastic Supply Example:

• If the price of a specific type of software increases, and programmers can quickly adapt their skills to produce more, it shows elastic supply.

1. Inelastic Supply Example:

• In the short term, the supply of rare minerals may be inelastic because it's challenging to increase production rapidly.

### Multiple Choice Questions:

1. What does elasticity of supply measure?

• A. Responsiveness of quantity demanded to price changes.

• B. Responsiveness of quantity supplied to price changes.

• C. Consumer preferences for goods.

• D. Market competition.

2. When is supply considered elastic?

• A. When ∣Es∣>1∣Es∣>1.

• B. When ∣Es∣<1∣Es∣<1.

• C. When ∣Es∣=1∣Es∣=1.

• D. When ∣Es∣∣Es∣ is undefined.

3. What is the characteristic of inelastic supply?

• A. ∣Es∣>1∣Es∣>1.

• B. ∣Es∣<1∣Es∣<1.

• C. ∣Es∣=1∣Es∣=1.

• D. No responsiveness to price changes.

4. Which factor influences elasticity by making supply more elastic?

• A. Availability of substitutes.

• B. Market competition.

• C. Time horizon.

• D. Production flexibility.

5. In the formula for elasticity of supply, what does Es represent?

• A. Elasticity of supply.

• B. Change in price.

• C. Change in quantity supplied.

• D. Time horizon.

6. When is supply considered inelastic?

• A. When ∣Es∣>1∣Es∣>1.

• B. When ∣Es∣<1∣Es∣<1.

• C. When ∣Es∣=1∣Es∣=1.

• D. When there are no substitutes.

7. What is unitary elasticity in supply?

• A. ∣Es∣>1∣Es∣>1.

• B. ∣Es∣<1∣Es∣<1.

• C. ∣Es∣=1∣Es∣=1.

• D. ∣Es∣∣Es∣ is undefined.

8. What factor makes a good a candidate for elastic supply?

• A. Necessity.

• B. Availability of substitutes.

• C. Short time horizon.

• D. Limited production flexibility.

9. Which type of goods tend to have elastic supply?

• A. Necessities.

• B. Inferior goods.

• C. Luxury goods.

• D. Substitutable goods.

10. How does time horizon affect elasticity of supply?

• A. Longer time horizon makes supply more elastic.

• B. Longer time horizon makes supply more inelastic.

• C. Time horizon has no impact on elasticity.

• D. Time horizon makes supply unitary elastic.

11. If the percentage change in quantity supplied is greater than the percentage change in price, what type of supply is it?

• A. Inelastic supply.

• B. Elastic supply.

• C. Unitary elasticity.

• D. No responsiveness.

12. What does a high availability of inputs do to the elasticity of supply?

• A. Makes supply more elastic.

• B. Makes supply more inelastic.

• C. Has no impact on elasticity.

• D. Makes supply unitary elastic.

13. What is the characteristic of unitary elasticity in supply?

• A. ∣Es∣>1∣Es∣>1.

• B. ∣Es∣<1∣Es∣<1.

• C. ∣Es∣=1∣Es∣=1.

• D. ∣Es∣∣Es∣ is undefined.

14. What type of goods are often associated with inelastic supply?

• A. Necessities.

• B. Inferior goods.

• C. Luxury goods.

• D. Complementary goods.

15. What happens to the elasticity of supply if production flexibility is limited?

• A. Makes supply more elastic.

• B. Makes supply more inelastic.

• C. Has no impact on elasticity.

• D. Makes supply unitary elastic.

16. How is the elasticity of supply calculated?

• A. Elasticity of Supply (Es)=Change in Quantity Supplied/Change in Price

• B. Elasticity of Supply (Es)=% Change in Quantity Supplied/% Change in PriceE

• C. Elasticity of Supply (Es)=Change in Quantity Demanded/Change in Price

• D. Elasticity of Supply (Es)=% Change in Quantity Demanded / % Change in Price

17. What is the characteristic of elastic supply?

• A. Increasing supply as price increases.

• B. Decreasing supply as price increases.

• C. No change in supply with price changes.

• D. No substitutes available.

18. How does the availability of substitutes affect the responsiveness of supply?

• A. Increases responsiveness.

• B. Decreases responsiveness.

• C. Has no impact on responsiveness.

• D. Makes supply unitary elastic.

19. How does the elasticity of supply differ from the elasticity of demand?

• A. They are the same concept.

• B. Elasticity of supply measures responsiveness to quantity demanded.

• C. Elasticity of demand measures responsiveness to price changes.

• D. They are unrelated concepts.

20. Which type of elasticity is characterized by a percentage change in quantity supplied equal to the percentage change in price?

• A. Elastic supply.

• B. Inelastic supply.

• C. Unitary elasticity.

• D. Perfectly elastic supply.