Final answer:
If the price elasticity of supply is 1.0, it indicates a constant unitary elasticity, where a 1 percent change in price leads to an equal 1 percent change in quantity supplied, representing proportional responsiveness to price changes.
Step-by-step explanation:
When the price elasticity of supply is 1.0, this value can be interpreted as a situation of constant unitary elasticity. In this case, a 1 percent increase in price would result in an exact 1 percent increase in the quantity supplied. Conversely, a 1 percent decrease in price would lead to a 1 percent decrease in quantity supplied.
This is one of the polar cases of elasticity and indicates that the firm’s quantity supplied is proportionally responsive to price changes. It is important to note that with an elasticity of less than one, called inelastic supply, the firm would have a low responsiveness to price changes. Thus, an elasticity of exactly 1 represents a balanced scenario where the supply response is neither too sensitive nor too insensitive to changes in price.