Question

Use the drop-down menu to complete each statement,

Elasticity is the measure of how producers and consumers react to changes in

A supply is

when the quantity of a good supplied does not change as the price changes

A supply is

when the quantity of a good supplied increases or decreases as the price changes

Intro

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Answer 1

Elasticity measures the responsiveness of the quantity supplied or demanded to price changes. Elastic supply indicates that the quantity supplied changes significantly with price changes, while inelastic supply indicates little to no change in quantity supplied due to price changes.

Step-by-step explanation:

Elasticity is the measure of how producers and consumers react to changes in market conditions, specifically the changes in price of a good or service. The concept of elasticity can be applied to both supply and demand, describing how sensitive the quantity supplied or demanded is to price changes. To clarify the statements provided:

1. A supply is inelastic when the quantity of a good supplied does not change significantly as the price changes.
2. A supply is elastic when the quantity of a good supplied increases or decreases significantly as the price changes.

The price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. A supply curve that is elastic indicates that the supply is very responsive to changes in price. Conversely, an inelastic supply curve shows that the supply is not very responsive to changes in price. Lastly, a unitary elasticity of supply denotes that a percentage change in price will cause an equivalent percentage change in quantity supplied.