Question

Under which conditions is price elasticity of supply relatively elastic or relatively inelastic?

1. Firms are operating in the short run
2. Firms would have a hard time storing their goods
3. Firms have a large amount of excess capacity
4. Firms can easily relocate from one location to another

Answer 1

1. Firms are operating in the short run - relatively inelastic

2. Firms would have a hard time storing their goods - relatively inelastic

3. Firms have a large amount of excess capacity - relatively elastic

4. Firms can easily relocate from one location to another - relatively elastic.

Step-by-step explanation:

The price elasticity of supply is less in the short run than in the long run. In the short run supplier does not have enough time to adjust the production level so supply is inelastic. The firms facing hard to store their goods then the supply is inelastic. If the firm has spare capacity available then the supply is relatively elastic because supplier can produce more if the demand is greater. The mobility factor also effects elasticity, if firm can easily relocate itself then the supply is elastic.