Give an example that shows price elasticity of supply. Avoid using examples from the text.
What will be an ideal response?
Example will vary but should show a thorough understanding of price elasticity of supply. For example, suppose a new fad causes the demand for turtleneck sweaters to increase significantly. As a result, the price for these sweaters increases by 10 percent. To meet the demand, producers use revenue from sales to increase the supply by 15 percent. Dividing 15 by 10 yields 1.5, so this example demonstrates price elasticity of supply since Es > 1.
You might also like to view...
Suppose the price of coffee is $3 each, the price of bagels is $2 each and a person's budget is $40. The person's real income is
A) $40. B) $13.33 in terms of bagels. C) $13.33 in terms of coffee. D) $8.
The decision by inflation targeters to choose inflation targets ________ zero reflects the concern of monetary policymakers that particularly ________ inflation can have substantial negative effects on real economic activity
A) below; high B) below; low C) above; high D) above; low
Wages often respond slowly to changes in output
a. True b. False
Why is the Chairman of the Federal Reserve often referred to as the "second most powerful person in the United States?"