Principles of Microeconomics, 7th Edition

Published by South-Western College
ISBN 10: 128516590X
ISBN 13: 978-1-28516-590-5

Chapter 5 - Part II - Elasticity and its Application - Questions for Review: 8

Answer

If a fixed quantity of a good is available, and no more can be made, the price elasticity of supply for this good will be zero. It will have a perfectly inelastic supply.

Work Step by Step

Price elasticity of supply is calculated as the percentage change of quantity supplied divided by the percentage change in price of a good. Since we know that no more of this good can be made, a change in price of this good will not change the quantity supplied. Therefore, elasticity of supply for this good will be zero, as the quantity supplied does not respond at all to changes in price of the good.
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