Question

If the price elasticity of supply for wheat is less than 1, then the supply of wheat is?

1) Perfectly elastic
2) Inelastic
3) Unit elastic
4) Perfectly inelastic

Answer 1

If the price elasticity of supply for wheat is less than 1, then the supply of wheat is inelastic.

Step-by-step explanation:

The price elasticity of supply measures how responsive the quantity supplied of a good or service is to a change in price. It is calculated as the percentage change in quantity supplied divided by the percentage change in price.

If the price elasticity of supply for wheat is less than 1, then the supply of wheat is inelastic. Inelastic supply occurs when the elasticity of supply is less than one, indicating that a 1 percent increase in price will result in a less than 1 percent increase in production. This suggests that the firm is not very responsive to price changes.