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CA Foundation · Business Economics · Theory of Demand and Supply

Which statement about the supply of agricultural produce such as wheat, in the short period after harvest, is most accurate?

Short-period supply of harvested wheat is highly inelastic. Output is already fixed by the harvest, so farmers cannot quickly raise the quantity offered when prices rise. Elastic supply needs time to grow more, which is unavailable right after harvest.

  1. ASupply is perfectly elastic because farmers can grow more at once
  2. BSupply is highly inelastic because quantity cannot be quickly changedCorrect
  3. CSupply is unitary elastic at all prices
  4. DSupply is negatively sloped because higher prices reduce output

Explanation

In the very short run, the stock after harvest is fixed, so producers cannot respond to price changes by producing more; supply is highly inelastic (even perfectly inelastic in the market period). Perfect elasticity would require ability to expand output freely, which is not available immediately.

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