3. In each of the following cases, do you think the price elasticity of supply i

Question

3. In each of the following cases, do you think the price elasticity of supply is (i) perfectly elastie; (ii) perfectly inelastic; (iii) elastic, but not perfectly elastic; or (iv) inelastic, but not perfectly inelastic? a. An increase in snowfall this winter leads to a huge jump in the sales price of snow blowers. b. The price of a kilowatt of electricity is the same during periods of high electricity demand as during peri- c. Fewer people want to fly during November than during any other month. The airlines cancel about 10 per d. Owners of vacation homes in Sandbanks rent them out during the summer. Due to the soft economy this ods of low electricity demand. cent of their flights as ticket prices fall about 20 percent during this month. year, a 30 percent decline in the price of a vacation rental leads more than half of homeowners to occupy their vacation homes themselves during the summer

Explanation / Answer

a) The supply is perfectly inelastic.THe quantity of snow blowers is fixed,as demand increases,the price of snow blowers increases without an increase in quantity supplied.

b) The supply is perfectly elastic.As the demand changes,the price does not change but the quantity supplied does change during the times of different electricity demand.

c) The supply is inelastic.When price falls by 20%,the quantity supplied falls by 10%.The price elasticity in this case is measured by 10%/20% =0.5 therefore it is inelastic.

d) The supply is elastic.When price falls by 30%,the quantity supplied falls by more than 50%(more than half of homeowners).TH price elasticity in this case is measured as 50%/30% =1.7 which is elastic.

Related Questions

Navigate

• Browse (All)
• Browse 3
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.