According to the law of supply, if buyers are willing to pay more, sellers are w

Question

According to the law of supply, if buyers are willing to pay more, sellers are willing to supply more. The price elasticity of supply is a measure of how much sellers are able to adjust the quantity supplied in response to changes in price. Read the following scenario and answer the corresponding questions. World renowned fashion designer Alvin Stein died recently. His company, Alvin Stein Designs has released the last 100 pair of his signature ASD Original jeans. The pattern and design sketches for the ASD Originals were buried with Alvin, per his last wishes. The current price of a pair of ASD Originals is $10,000. . What is the current price elasticity of supply for a pair of ASD Originals? Explain your answer. . Five years after his death, Alvin's sister, Jan released an exact replica of the signature jeans, called ASD Original 2.0, priced at $5000. How might this affect the demand for the remaining 50 pairs of ASD Originals, still retailing for $10,000? 2 . Ten years after Alvin's death, a vault is discovered containing 1000 pairs of ASD Originals. How might this discovery affect the demand for the remaining 30 pairs of ASD Originals? How might this affect the price elasticity of supply for the ASD Original 2.0 jeans?

Explanation / Answer

answer--Alvin Stein Designs has released the last 100 pair of his signature ASD Original jeans. The current price of a pair of ASD Originals is $10,000.
What is the current price elasticity of supply for a pair of ASD Originals?
It is zero. This is because the supply is fixed at 100 and cannot be increase for any given increase in the price. This comes from the phrase ' the last 100 pair'.
Five years after his death, Alvin’s sister, Jan released an exact replica of the signature jeans, called ASD Original 2.0, priced at $5000. How might this affect the demand for the remaining 50 pairs of ASD Originals, still retailing for $10,000?
These two are close substitutes so with release of new range of jeans, the demand for the remaing 50 pairs is likely to decrease.
Ten years after Alvin’s death, a vault is discovered containing 1000 pairs of ASD Originals. How might this discovery affect the demand for the remaining 30 pairs of ASD Originals? How might this affect the price elasticity of supply for the ASD Original 2.0 jeans?
When the supply of original ASD jeans increases by 1000 pairs, the supply curve will shift to the right and this will reduce the price on oveall ASD Originals. Hence there will be an increased quantity demanded of ASD Originals. The price elasticity of supply is increased in the value because now the the supply is not fixed at 100 but 1030 pairs. However, when this limit is reached, supply again becomes inelastic.

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