Under what conditions is supply likely to display greater price elasticity?
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Answer: D. If it is easy to expand output
Explanation
Supply elasticity is higher when firms can easily scale production up or down. Flexible production processes allow quick responses to changing market price incentives. Access to readily available inputs ensures output can expand without steep cost increases. Price elasticity of supply measures how responsive quantity supplied is to price changes. In the long run, firms can build new factories, making supply more elastic than short run. Immobile factors of production restrict how fast industries can adjust output levels.
Agricultural products often have inelastic short-run supply due to fixed growing seasons. Manufactured goods usually feature elastic supply because factory output adjusts rapidly. Understanding supply elasticity helps predict how markets react to taxes and subsidies. Short run supply is typically less elastic because production capacity remains fixed. Immobile production factors restrict output adjustments, lowering price elasticity of supply. Very few producers can indicate market power but does not inherently guarantee elastic supply.
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