If the quantity supplied changes by a smaller percentage than the percentage change in price, the supply is?

If the quantity supplied changes by a smaller percentage than the percentage change in price, the supply is?

• A. Elastic Supply
• B. Inelastic Supply
• C. Unit Elasticity of Supply
• D. Perfectly Elastic Supply

Answer: (B)

Elasticity of supply measures how much producers respond to price changes. If the price goes up and the quantity supplied increases, but by a smaller percentage than the price, producers aren’t adjusting production very much. That means the supply is inelastic. It often happens in the short run when capacity, equipment, or inputs can’t be changed quickly, so output can’t keep up with price changes. For example, a farmer can’t instantly plant more crops to match a price rise; output grows only a little in response. The elasticity is less than one in this case. If the response were greater than the price change, it would be elastic; if it were about the same, unit elastic; and if a tiny price change caused a huge change in quantity, it would be perfectly elastic.

Elasticity of supply measures how much producers respond to price changes. If the price goes up and the quantity supplied increases, but by a smaller percentage than the price, producers aren’t adjusting production very much. That means the supply is inelastic. It often happens in the short run when capacity, equipment, or inputs can’t be changed quickly, so output can’t keep up with price changes. For example, a farmer can’t instantly plant more crops to match a price rise; output grows only a little in response. The elasticity is less than one in this case. If the response were greater than the price change, it would be elastic; if it were about the same, unit elastic; and if a tiny price change caused a huge change in quantity, it would be perfectly elastic.