A key determinant of the price elasticity of supply is the
A)number of close substitutes for the good in question.
B)extent to which buyers alter their quantities demanded in response to changes in prices.
C)length of the time period.
D)extent to which buyers alter their quantities demanded in response to changes in their incomes.

Question

Quizplus · Accepted Answer

The length of the time period is a key determinant of the price elasticity of supply because it determines how much time producers have to adjust their production to changes in price. In the short run, producers may not be able to adjust their production in response to price changes, so the supply will be relatively inelastic. In the long run, however, producers have more time to adjust their production, so the supply can become more elastic. Factors A, B, and D are all determinants of price elasticity of demand, not supply.

A Key Determinant of the Price Elasticity of Supply Is