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Economics b questions with complete solutions 2024
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Economics b questions with complete solutions 2024
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Economics: PES, IED and XED (Chapter4)
Price elasticity of supply (PES) - correct answer ✔A measure of the
responsiveness of the quantity supplied (producer) to a change in the price
they receive for their good or service.
PES Formula - correct answer ✔PES = %ΔQs/%ΔP
PES Goods - correct answer ✔PES < 1, then the good is price inelastic
PES > 1, then the good is price elastic
PES = 1, then the good is unitary price elasticity of supply
Perfect elasticity of supply (special case of PES) - correct answer ✔In this
case, a producer (or all producers in a market) are willing to produce an
unlimited supply of a good as long as they receive at least price P for the
good. When PES = infinity.
Perfect inelasticity of supply (special case of PES) - correct answer ✔In this
case, a producer (or the entire market) can supply only a limited, finite
quantity Q of a good regardless of the price offered in the market (such as for
agricultural produce at harvest time). When PES = 0.
Momentary supply curve (MSC) (special case of PES) - correct answer
✔The supply curve that exists at a particular moment without the possibility of
further production. If farmers were to destroy their goods to reduce their
supply, for example.
Determinants of PES - correct answer ✔1) Time period available for
production
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