The supply of a good to a market is likely to be more elastic when ____________________

Question

BlackTom AI · Accepted Answer

To analyze the elasticity of supply, we examine how easily producers can adjust output in response to a price change across different conditions.
Option a: 'producers are operating close to full capacity.' When firms are already near full capacity, there is little room to increase output quickly, so supply tends to be less elastic in the short run. This makes the statement unlikely to describe more elastic supply.
Option b: 'Factor inputs cannot be substituted between alternative uses.' If inputs cannot be substituted, firms cannot reallocate resources easily to expand production, reducing the ease of increasing supply and hence lowering elasticity. This does not promote greater elasticity.
Option c: 'Stock levels are low.' Low stock levels imply limited immediate availability to meet a price-induced demand without producing more, which typically reduces short-run supply elasticity. Firms would need time to produce more to stock up, again implying lower elasticity in the near term.
Option d: 'the time period required for production is small.' When the production time is short, firms can adjust output quickly in response to price changes (e.g., ramp up production, shift resources within capabilities), which increases the elasticity of supply. This option describes a condition that would make supply more responsive in the near term, aligning with the concept that shorter production lags can boost elasticity compared to longer lags.
Overall, each of the first three options points toward constraints that reduce immediate responsiveness, whereas a short production period tends to enhance the ability to adjust quantity supplied rapidly, matching the idea of higher elasticity under shorter production time. This is why the statement about a small time period is treated as describing a more elastic supply condition.

Price Elasticity of Demand and Supply Quiz

The supply of a good to a market is likely to be more elastic when ____________________

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