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If the supply curve exhibits a linear, upward slope, and possesses a positive intercept, what is the corresponding price elasticity of supply?

A. Perfectly elastic
B. Inelastic
C. Unitary elastic
D. Perfectly inelastic

User Grillp
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1 Answer

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Final answer:

The corresponding price elasticity of supply for a supply curve that is a straight line reaching up from the origin with constant unitary elasticity, where the percentage increase in quantity supplied is equal to the percentage increase in price, is unitary elastic.

Step-by-step explanation:

If a supply curve exhibits a linear, upward-sloping curve with a positive intercept, it doesn't automatically determine the price elasticity of supply because elasticity also depends on the proportional change in quantity supplied relative to the change in price. However, according to the information given, specifically referring to Figure 5.7, which describes a constant unitary elasticity supply curve as a straight line reaching up from the origin where the percentage increase in quantity supplied is the same as the percentage increase in price, the corresponding price elasticity of supply is unitary elastic. This is because the proportional change or percentage increase in price results in an equivalent percentage increase in quantity supplied, which implies that the price elasticity of supply is indeed unitary elastic (Option C).

User Nafg
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