IB Diploma Programme (DP) - SL & HL · Economics

Elasticity of supply: Practice Questions

5 multiple-choice questions marked as you go, and 5 written questions with worked solutions. All on Elasticity of supply.

10 questions27 marksFree, no account

Question 1

1 mark

Why is the price elasticity of supply (PES) for primary commodities, such as agricultural products, typically lower than that for manufactured goods in the short run?

Question 2

1 mark

A firm faces a price elasticity of supply (PES) of \( 0.5 \). If the market price falls by \( 10\% \) and the initial quantity supplied by the firm was \( 500 \) units, what will be the new quantity supplied, assuming all other factors remain constant?

Question 3

1 mark

Two linear supply curves, \( S_1 \) and \( S_2 \), both pass through the origin. If \( S_1 \) has a steeper slope than \( S_2 \), which of the following statements is true regarding their price elasticity of supply (PES)?

Question 4

1 mark

A manufacturing firm has a price elasticity of supply (PES) of \( 1.2 \). If the market price increases by \( 15\% \), what will be the new quantity supplied if the initial quantity was \( 2,000 \) units?

Question 5

1 mark

The supply of a product is more likely to be price elastic if:

Question 6

3 marks

Describe the graphical shape and slope of a perfectly elastic supply curve on a standard price-quantity diagram, and state its PES value.

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Question 7

5 marks

Analyze the impact of perishability and the lack of storage facilities on the price elasticity of supply (PES) for agricultural producers during the momentary period compared to the long run.

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Question 8

4 marks

Discuss how the mobility of factors of production influences whether a firm's price elasticity of supply (PES) is elastic or inelastic.

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Question 9

4 marks

Consider two different manufacturing firms: Firm A, which produces specialized medical equipment with a long production cycle and no existing inventory, and Firm B, which produces plastic containers and maintains significant levels of spare capacity and finished stock.

(a) Define Price Elasticity of Supply (PES).
(b) Explain which of the two firms is likely to have a more elastic supply in response to a sudden 15% increase in market price, citing two specific determinants of PES.

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Question 10

6 marks

Analyze the Price Elasticity of Supply (PES) for an extractive industry, such as gold mining, across three distinct time periods: the momentary period, the short run, and the long run.

(a) Explain how the mobility of factors of production and the availability of technology influence the slope of the supply curve as the firm moves from the short run to the long run.
(b) Discuss two reasons why the PES for primary commodities like gold is generally lower than the PES for manufactured goods in the short run.
(c) If a sudden surge in global demand for gold occurs, describe the likely impact on price and quantity if the PES is perfectly inelastic.

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