AP Microeconomics Flashcards: Price Elasticity of Supply
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Review key ideas with interactive flashcards. This set includes 10 cards to help you master important concepts.
What is one factor that determines the price elasticity of supply?
The price elasticity of supply depends on factors such as the price of alternative inputs used in production.
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What is one factor that determines the price elasticity of supply?
The price elasticity of supply depends on factors such as the price of alternative inputs used in production.
What does the general economic concept of 'elasticity' measure?
Measures of elasticity define the responsiveness of one variable to a change in another variable, such as the responsiveness of quantity to a change in price.
What does it mean for supply to be 'elastic'?
Elastic supply occurs when the price elasticity of supply is greater than 1, meaning the quantity supplied is highly responsive to price changes.
What is price elasticity of supply?
Price elasticity of supply measures the responsiveness of the quantity supplied to changes in price.
Define 'unit elastic' supply.
Unit elastic supply exists when the price elasticity of supply is exactly 1, meaning the percentage change in quantity supplied equals the percentage change in price.
How is the price elasticity of supply calculated?
It is calculated as the percentage change in quantity supplied divided by the percentage change in price.
Calculate the price elasticity of supply if the price of a good rises from $10 to $12 and the quantity supplied rises from 100 to 130 units.
The price elasticity of supply is 1.5. The percentage change in price is 20% and the percentage change in quantity is 30% (30%/20% = 1.5).
What benchmark value separates elastic from inelastic supply?
The separating benchmark for price elasticity of supply is a magnitude of 1.
If a 10% increase in price leads to a 5% increase in quantity supplied, is the supply elastic or inelastic?
The supply is inelastic because the elasticity measure (5% / 10% = 0.5) is less than 1.
What does it mean for supply to be 'inelastic'?
Inelastic supply occurs when the price elasticity of supply is less than 1, meaning the quantity supplied is not very responsive to price changes.