Reading 13: Elasticity LOS a（part4）习题精选 div, following, factors, likely

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LOS a, (Part 4): Discuss the factors that influence the elasticity of supply.

Which of the following is least likely to affect the elasticity of supply for a good?

A) The uniqueness of production inputs.

B) The time frame for making the supply decision.

C) The relative amount of income spent on the good.

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Elasticity of supply is influenced by the time frame within which the supply decision is made and the ability to make substitutions between productive resources. Unique inputs do not have good substitutes. The relative amount of income spent on a good is a determinant of the price elasticity of demand.

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Economics commentator Gail Brythe is discussing the different factors that influence the elasticity of supply. She states the following:

Statement 1: Elasticity of supply is greater when a good or service can only be produced with unique or rare inputs.

Statement 2: Typically, a good’s momentary supply elasticity is higher than its short-run supply elasticity, which in turn is higher than its long-run supply elasticity.

With respect to Brythe’s statements:

A) only statement 1 is incorrect.

B) both are incorrect.

C) only statement 2 is incorrect.

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Both statements are incorrect. Elasticity of supply (i.e., the responsiveness of the supply of a good to changes in its price) is low when a good can only be produced with rare or unique inputs, because the potential output of the good is constrained by the availability of those inputs. Supply elasticity is lowest in the momentary time frame because producers typically cannot change the output of a good immediately. Supply becomes more elastic as the time frame increases because long-run adjustments in capital investment and technology lead to greater changes in profit maximizing output levels.