ECONOMICS
MARKETS AND PRICES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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less elastic in the long run than in the short run.
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determined by the availability of substitutes.
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affected by the stocks of wheat available.
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more elastic when there are restrictions on the amount of wheat that can be imported.
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Detailed explanation-1: -The availability of stocks can increase the ability of a firm to respond quickly so will increase the supply elasticity, at least for a short time.
Detailed explanation-2: -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-3: -Wheat is a crop that depends on favourable weather conditions. It is one of the most versatile crops being able to grow in a wide variety of locations, but still extremes of weather, such as excess heat, cold and lack of rain, will cause a fall in supply as farmers see diminished crops.
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.