CA Foundation · Business Economics · Theory of Demand and Supply
A straight-line supply curve that starts from the origin (passes through the point of origin) has which value of price elasticity of supply at every point on it?
The elasticity is equal to one at every point. When a straight-line supply curve passes through the origin, quantity is proportional to price, so a given percentage rise in price always produces the same percentage rise in quantity supplied, giving unitary elasticity throughout.
- AZero
- BLess than one
- CEqual to oneCorrect
- DGreater than one
Explanation
For a linear supply curve through the origin, Q = kP, so the ratio P/Q is constant at 1/k and the slope dQ/dP equals k. Elasticity = k × (1/k) = 1 at every point. A curve cutting the price axis has elasticity above one, and one cutting the quantity axis has elasticity below one.
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