Question:
The supply function of good X is given by the equation $QS = 8P$, where P is the price of the good and QS is the quantity supplied. According to this equation, the price elasticity of supply of good X is
(1) 1.0
(2) -1.0
(3) 8.0
(4) -8.0
(5) 0.1
Correct Answer:
(1)
Answer Explanation:
Any linear supply curve that passes exactly through the origin (where the constant/intercept is zero, like $Q_S = 8P + 0$) will always have a unitary price elasticity of supply (PES = 1.0) at all points along the curve.
Topic: Elasticity Year: 2021
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