Answer to Question #85916 in Microeconomics for Likopo

Question

The price elasticity of supply is likely to be greater for motor vehicles in general than for a specialized market, such as sport utility vehicles.
1) True
2) False

Answer 1

1) True

Both products are elastic, as they have many substitutes (a sufficient number of manufacturers of similar goods), occupy a large part of the income of the consumer (more correctly, they require several incomes of the consumer or savings). But if to compare with each other, then the elasticity of the automotive market in general will be higher than the specialized ones. The reason for this is the greater the number of participants in the market (manufacturers, buyers), the cost of an average car, as a rule, is lower than a specialized car, especially a sports car.