Question

In which of the following situations would supply be the most elastic?

a) An auto parts manufacturer is operating at capacity.
b) A real estate developer in Boston is looking to build condos on the waterfront.
c) A furniture manufacturer is operating its factory 8 hours per day.
d) A hotel has all of its rooms booked for each night of the next 3 months.

Answer 1

Among the given options, the furniture manufacturer operating its factory for only 8 hours a day would have the most elastic supply because they have the potential to increase production by extending operational hours.

Step-by-step explanation:

When considering which situation would have the most elastic supply, we look for scenarios where production can easily be increased or decreased in response to price changes. Among the given scenarios:

• An auto parts manufacturer operating at capacity would have inelastic supply, as they cannot easily increase production.
• A real estate developer in Boston facing land constraints on the waterfront would likely have inelastic supply as well.
• A furniture manufacturer operating its factory for only 8 hours a day could potentially increase production by adding shifts, indicating more elastic supply.
• A hotel that is fully booked for the next three months has no room to accommodate more guests and thus an inelastic supply.

Therefore, the furniture manufacturer operating its factory 8 hours per day would have the most elastic supply because they can reasonably expand production hours.