The price elasticity of supply is determined by how rapidly production costs increase as the total output of the industry increases.

Question

Quizplus · Accepted Answer

The price elasticity of supply measures the responsiveness of the quantity supplied to a change in price. It is determined by the degree to which production costs increase as output increases. As production costs rise more rapidly with increasing output, the price elasticity of supply becomes lower, indicating that producers are less responsive to changes in price. Conversely, as production costs rise more slowly with increasing output, the price elasticity of supply becomes higher, indicating that producers are more responsive to changes in price. Therefore, the statement is true.

The Price Elasticity of Supply Is Determined by How Rapidly