What does elasticity of supply measure?

What does elasticity of supply measure?

• A. The responsiveness of quantity supplied to price changes
• B. The responsiveness of quantity demanded to price changes
• C. The efficiency of production technology
• D. The total cost of producing a good

Answer: (A)

Elasticity of supply measures how responsive producers are to price changes. It is the percentage change in quantity supplied divided by the percentage change in price, assuming other factors stay constant. When prices rise and producers noticeably increase what they offer for sale, supply is elastic; when output barely changes, supply is inelastic. This concept explains how quickly the market can adjust to new price signals and why the supply curve slopes upward. It’s different from elasticity of demand, which looks at how quantity demanded responds to price changes, and it does not reflect production efficiency or total production costs.

Elasticity of supply measures how responsive producers are to price changes. It is the percentage change in quantity supplied divided by the percentage change in price, assuming other factors stay constant. When prices rise and producers noticeably increase what they offer for sale, supply is elastic; when output barely changes, supply is inelastic. This concept explains how quickly the market can adjust to new price signals and why the supply curve slopes upward. It’s different from elasticity of demand, which looks at how quantity demanded responds to price changes, and it does not reflect production efficiency or total production costs.