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26 April, 09:01

Consider a linear, upward sloping supply curve. If the supply curve shifts upward, then: the price elasticity of supply will increase. the price elasticity of supply will increase if the slope of the supply curve is greater than one and the lowest price needed to induce firms to supply anything is positive. the price elasticity of supply will increase if the slope of the supply curve is greater than one. the price elasticity of supply will be constant. none of the above

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  1. 26 April, 10:45
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    The answer is: the price elasticity of supply will increase if the slope of the supply curve is greater than one and the lowest price needed to induce firms to supply anything is positive

    Explanation:

    The law of supply is the higher the price the higher the quantity supplied and vice-versa. An increase in supply shifts the supply curve to the right and a decrease shifts the supply curve to the left.

    Price elasticity of supply is the ratio of percentage change in quantity supplied of a good to percentage change in price of the good.

    The upward shift of supply curve tells us that supply often decreases when the costs of production increase, so producers need to set a higher price inorder to cover the higher cost of inputs (cost of production) and vice-versa for the downward shift.

    So considering a linear, upward sloping supply curve. If the supply curve shifts upward, then the price elasticity of supply will increase if the slope in greater than one (supply is elastic) indicating a high responsiveness to changes in price. And also, the lowest price for the goods must be encouraging (positive) so as to serve as motivation to produce.

    Note: A high price tells producers that a good is in demand and they should make more and vice-versa
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