Admin What is the key factor in determining if a good is elastic or inelastic?
There are several factors that affect how elastic (or inelastic) the price elasticity of demand is, such as the availability of substitutes, the timeframe, the share of income, whether a good is a luxury vs. a necessity, and how narrowly the market is defined.
What is a key determinant of the elasticity of supply?
A key determinant of the price elasticity of supply is the amount of time that has passed since the price changed.
What determines supply?
Supply refers to the quantity of a good that the producer plans to sell in the market. Supply will be determined by factors such as price, the number of suppliers, the state of technology, government subsidies, weather conditions and the availability of workers to produce the good.
Which factor is not a determinant of supply?
Income is not a determinant of supply. The supply of a commodity depends on various determinants.
What are the factors that affect elasticity of supply?
There are numerous factors that impact the price elasticity of supply including the number of producers, spare capacity, ease of switching, ease of storage, length of production period, time period of training, factor mobility, and how costs react.
How do you know if a product is elastic or inelastic?
This is determined by measuring the percentage change in its supply and the percentage change in its price over a period of time. Dividing the change in supply by the change in price results in a numerical value. If that number is more than one, the product shows price elasticity. If it is less than one, the product is inelastic.
How does price affect the supply elasticity of supply?
Therefore, an increase in price increases the output by a greater factor because a company is able to produce more for a smaller price input. Another factor that affects the supply elasticity of a good or a service is the amount of producers.
How does innovation affect the elasticity of supply?
Innovation tends to make goods or services more elastic. When there is innovation in technology, it leads to efficiency in the production of goods or services. Therefore, an increase in price increases the output by a greater factor because a company is able to produce more for a smaller price input.
What is the difference between price elasticity and price sensitivity?
Elasticity is an economic term describing the change in the behavior of buyers and sellers in response to a price change for a good or service. Price sensitivity is the degree to which the price of a product affects the purchasing behaviors of consumers.