20. ( 1 pt). What is the main determinant of the price elasticity of supply? Exp
ID: 1163974 • Letter: 2
Question
20. ( 1 pt). What is the main determinant of the price elasticity of supply? Explain. The ease of shifting resources to altermative uses is the main one. ( ) is often a critical factor affecting the ease of substitution. The longer the time, the easier it is for producers to shift resources into production and increase the quantity supplied. The more time the firm has to adjust to a change in price, the greater the elasticity of supply 21. (extra points). Draw three supply and demand graphs that illustrate the effect of time on the elasticity of supply using the below graphs. The three graphs should show: (a) the immediate market period; (b) the short run; and (c) the long run. (a) immediate market (b) the short run 2 pts) Explain how the price elasticity of supply is related to the prices of antiques and gold. (c) the long run 22( The supply of antiques and gold is relatively ( elastic, inelastic) There is little or no change in quantity supplied to a change in price. As a consequence, increase in demand will often cause large changes in price in the case of antiques. Gold is highly ( yolatile, stable) in price because small increases or decreases in demand can cause large changes in price. (Visit www.goldprices.com and see how gold prices (US $ per ounce) has changed over time.) 23. ( 2 pts) For the following three cases, use a midpoints formula to calculate the coefficient for the cross elasticity of demand and identify the type of relationship between the two products (a) The quantity demanded for product A increases from 30 to 40 as the price of product B increases from $0.10 to $0.20. Relationship:( relationship (b) The quantity demanded for product A decreases from 3000 to 1500 as the price of good B increases from $5 to S10. Coefficient: Relationship: (substitute, complementary, independent) relationship (b)The quantity demanded for product A remains 400 units as the price of product B increases from $25 to $30 Coefficient: Relationship: ( ) relationship 24. (3 pts). Use the information in the table below to identify the income elasticity type of each of the following products, A and B. Percent change Income Income elasticity Percent change in quantity elasticity Negative income(e.g., -6) means decreases in income. What does it mean if the income elasticity coefficient is negative? (Explanation / Answer
20.) Time Period is often the critical factor affecting ease of substitution. The longer the time period, easier it is for producers to shift resources into production and increase the quantity supplied. Hence supply is elastic in long period, whereas in short period it is difficult to allocate resources for prodection. Hence it is difficult to increase quantity supplied. Thus in short run supply is inelastic.
Hence the answer is Time Period .
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