Give an example that shows price inelasticity of supply. Avoid using examples from the text.
What will be an ideal response?
Examples will vary but should show a thorough understanding of price inelasticity of supply. For example, suppose a study shows the health benefits of eating olives. As a result, the demand for olives increases, thereby increasing the price by 5 percent. However, olive trees take a long time to mature, so suppliers cannot immediately increase supply to meet demand. So the quantity supplied increases by only 1 percent. Dividing 1 by 5 yields 0.2, so this example shows inelasticity of supply because Es < 1.
You might also like to view...
The Taylor rule implies that the Fed should set the federal funds target based on which of the following?
A) the proportionate gap between actual real GDP and a measure of potential real GDP B) the current deviation of the actual inflation rate from the Fed's inflation objective C) an estimated long-run real interest rate D) all of the above
A local government would not be efficient in providing which of the following services?
A. International aid B. Police protection C. Fire protection D. Roads
Hold Jared's preferences for pizza and Pepsi constant. Suppose Jared's income, as well as the prices of pizza and Pepsi, double. As a result,
a. both Jared's indifference curves and his budget constraint change. b. Jared's indifference curves change, but his budget constraint does not change. c. Jared's budget constraint changes, but his indifference curves do not change. d. neither Jared's indifference curves nor his budget constraint change.
How frequently is the survey that determines unemployment released?
a. quarterly b. yearly c. weekly d. monthly