Table of Contents
What is the relationship between elasticity of supply and time?
1) Time to produce: The amount of time it takes producers to respond to price changes is extremely important to the elasticity of supply. If the price of an output increases, and producers have time to adjust supply, supply will be more elastic.
How does the marginal product of labor change when a fourth worker is added?
How does the marginal product of labor change as more workers are hired? As more people are hired, the marginal product of labor decreases because eventually having more and more employees will not make the company more productive.
What affects elasticity of supply most?
There are numerous factors that directly impact the elasticity of supply for a good including stock, time period, availability of substitutes, and spare capacity. The state of these factors for a particular good will determine if the price elasticity of supply is elastic or inelastic in regards to a change in price.
How does elasticity affect price and quantity?
The more elastic the demand curve, the easier it is for consumers to reduce quantity instead of paying higher prices. The more elastic the supply curve, the easier it is for sellers to reduce the quantity sold, instead of taking lower prices.
What is the law of supply in your own words?
Definition: Law of supply states that other factors remaining constant, price and quantity supplied of a good are directly related to each other. When the price of a good rises, the supplier increases the supply in order to earn a profit because of higher prices.
What does elasticity of supply mean in economics?
Price elasticity of supply measures the responsiveness to the supply of a good or service after a change in its market price. According to basic economic theory, the supply of a good will increase when its price rises. Conversely, the supply of a good will decrease when its price decreases.
When does the supply of a good decrease?
Conversely, the supply of a good will decrease when its price decreases. There’s also price elasticity of demand. This measures how responsive the quantity demanded is affected by a price change. Overall, price elasticity measures how much the supply or demand of a product changes based on a given change in price.
What are the two types of price elasticity?
There are two types of price elasticity: price elasticity of supply and price elasticity of demand. The price elasticity of supply measures the responsiveness to the supply of a good or service after a change in its market price.
When does the supply curve become more elastic?
It is during such periods that there may be calls for rent controls. If the period of time under consideration is a few years rather than a few months, the supply curve is likely to be much more price elastic. Over time, buildings can be converted from other uses and new apartment complexes can be built.