ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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is less elastic the longer the time period in question.
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is more elastic the more substitutes there are for wheat.
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is greater the more wheat there is in storage.
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will be higher if there are restrictions on wheat imports.
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Detailed explanation-1: -Since the PES for wheat is less than 1, it implies that any change in the P of wheat will cause a very negligible change in the QS of wheat. Hence, the supply of wheat is price inelastic.
Detailed explanation-2: -The price elasticity of supply (PES) is the measure of the responsiveness of the quantity supplied of a particular good to a change in price (PES = % Change in QS / % Change in Price).
Detailed explanation-3: -The price elasticity of demand for wheat bread is 2.1, and the price elasticity of supply for wheat bread is 1.6.
Detailed explanation-4: -Our Bottom Line: Wheat Supply Inelasticity. An economist might say that the world’s wheat supply has been inelastic. All they mean though is that there has been a limited response to higher prices. However, it’s tough for us to increase our wheat supply.