Question

A key determinant of the price elasticity of supply is the a. time horizon. b. income of consumers. c. importance of the good in a consumer’s budget. d. price elasticity of demand.

Answer 1

The correct answer is:

a. time horizon.

The price elasticity of supply is primarily determined by the time horizon under consideration. Short-run supply tends to be less elastic because producers may not be able to adjust their production levels quickly in response to price changes. In the long run, producers have more flexibility to adjust their production capacity, making the supply more elastic. Factors like income of consumers, the importance of the good in a consumer's budget, and the price elasticity of demand can indirectly influence the supply elasticity, but the primary determinant is the time horizon.

Step-by-step explanation: