ECONOMICS
MARKETS AND PRICES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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zero.
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between zero and-1.
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between-1 and minus infinity.
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positive
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Detailed explanation-1: -Because price and quantity supplied usually move in the same direction, the price elasticity of supply is usually positive. The larger the price elasticity of supply, the more responsive the firms that supply the good or service are to a price change.
Detailed explanation-2: -Price elasticities are negative except in special cases. If a good is said to have an elasticity of 2, it almost always means that the good has an elasticity of −2 according to the formal definition. The phrase “more elastic” means that a good’s elasticity has greater magnitude, ignoring the sign.
Detailed explanation-3: -Price elasticity of demand is negative, as demand is inversely proportional to the price change for most goods. Hence, the option is true.
Detailed explanation-4: -Negative elasticities of supply figures result in an inelastic relationship between quantity supplied and price. This means a change in price has no effect on the change in supply. Positive numbers mean the relationship between price and quantity supplied is elastic.