A new technology dramatically speeds up the production process for widgets, allowing manufacturers to increase their output more easily in response to price changes. Given this development, what can we most likely conclude about the price elasticity of supply for widgets?

Question

BlackTom AI · Accepted Answer

To approach this question, we start by understanding what a technological improvement that speeds up production does to supply.
Option 1 says the supply curve shifts left with no change in elasticity. A leftward shift would indicate a decrease in supply, which contradicts the scenario of a technology that speeds production and makes supply easier to provide. Therefore this option misreads both direction and cause.
Option 2 claims the supply has become more inelastic. Increased production speed from a new technology actually makes it easier for producers to respond to price changes, not harder, so elasticity should not decrease; this option goes against the intuitive effect of a productivity boost.
Option 3 states the supply has become perfectly inelastic. Perfect inelasticity implies supply cannot respond to price changes at all, which is incompatible with a technology that speeds up production and enables greater responsiveness to prices.
Option 4 asserts the supply has become more elastic. With a technology that dramatically speeds up production, firms can adjust output more readily in response to price fluctuations. This increases the responsiveness of quantity supplied to price changes, i.e., higher elasticity, which aligns with economic intuition about productive advancements.

A new technology dramatically speeds up the production process for widgets, allowing manufacturers to increase their output more easily in response to price changes. Given this development, what can we most likely conclude about the price elasticity of supply for widgets?

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