Question

An elasticity of supply of 2.7 means that:

1) Supply is perfectly elastic
2) Supply is perfectly inelastic
3) Supply is relatively elastic
4) Supply is relatively inelastic

Answer 1

An elasticity of supply of 2.7 means that supply is relatively elastic. Supply is highly responsive to changes in price.

Step-by-step explanation:

An elasticity of supply of 2.7 means that supply is relatively elastic. Elasticity of supply measures the responsiveness of quantity supplied to a change in price. With an elasticity of supply of 2.7, a 1% increase in price will lead to a greater than 2.7% increase in quantity supplied. This indicates that supply is highly responsive to changes in price.