Answer to Question #158932 in Microeconomics for Lii

Question

Use the price elasticity of supply concept and your own reasoning to judge whether the supply for each of the following products is either elastic or inelastic: 

   (i)  Gold               

   (ii) Testing kits for Covid 19                     

  ( iii) Headphone

   (iv) Moderna COVID 19 vaccine                      

Answer 1

Price elasticity of supply refers to the measure of how the quantity supplied responds to a change in the price of certain goods. The impact that prices pose on the elasticity of supply also affects the elasticity of demand. The supply of gold is inelastic due to the limited availability of raw materials despite the market value. However, the supply of headphones is elastic because the product is luxurious and people can do without it. The supply of testing kits for Covid-19 is inelastic because as the cases of Covid-19 rise, manufacturers will produce more to meet the public demand, but at the same prices. However, the supply will fall upon containing the virus to ensure no to minimal cases. Lastly, the supply of the Moderna COVID 19 vaccine will remain inelastic because its demand is static; high, despite the market.