If a supply curve is elastic then:(a) The elasticity coefficient is equal to infinity;(b) The supply curve for the good is vertical;(c) The elasticity coefficient is greater than 1;(d) Both (b) and (c) above are correct.A10. Demand is likely to be more elastic due to all but one of the following:(a) There are many close substitutes for the product available;(b) Consumers spend a very small proportion of their income on theproduct;(c) Consumers have a long period of time to adjust to the new prices;(d) The product is a final product rather than an intermediate product.
Question
If a supply curve is elastic then:(a) The elasticity coefficient is equal to infinity;(b) The supply curve for the good is vertical;(c) The elasticity coefficient is greater than 1;(d) Both (b) and (c) above are correct.A10. Demand is likely to be more elastic due to all but one of the following:(a) There are many close substitutes for the product available;(b) Consumers spend a very small proportion of their income on theproduct;(c) Consumers have a long period of time to adjust to the new prices;(d) The product is a final product rather than an intermediate product.
Solution
The answer to the first question is (c) The elasticity coefficient is greater than 1. This is because an elastic supply curve means that suppliers are very responsive to changes in price. If the price increases by 1%, the quantity supplied increases by more than 1%, hence the elasticity coefficient is greater than 1.
The answer to the second question is (b) Consumers spend a very small proportion of their income on the product. This is because if consumers spend a small proportion of their income on a product, they are less likely to notice or react to a price change, making the demand inelastic. The other options (a, c, and d) are factors that would make demand more elastic, not less.
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