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How does the quantity supplied of a good with a large price elasticity of supply react to a change in price?
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4. Elasticity
Price Elasticity of Supply
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A key determinant of the price elasticity of supply is the:
A
amount of time producers have to adjust to price changes
B
number of buyers in the market
C
level of consumer income
D
price of complementary goods
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Understand that the price elasticity of supply measures how much the quantity supplied of a good responds to a change in its price.
Recall that one of the main factors affecting this elasticity is the time producers have to adjust their production levels after a price change.
Recognize that the number of buyers, consumer income, and prices of complementary goods primarily affect demand, not supply elasticity.
Focus on how longer adjustment periods allow producers to increase or decrease production more easily, making supply more elastic.
Conclude that the key determinant of price elasticity of supply is the amount of time producers have to adjust to price changes.
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