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Chapter 5: Problem 27

Can you think of an industry (or product) with near infinite elasticity of supply in the short term? That is, what is an industry that could increase Qs almost without limit in response to an increase in the price?

Short Answer

Expert verified
In conclusion, the industry that comes close to having near-infinite elasticity of supply in the short term is digital goods and services, particularly online course platforms. This is because they can easily replicate and deliver their products with minimal costs and resources, allowing them to quickly increase the quantity supplied in response to an increase in price.

Step by step solution

01

Elasticity of supply refers to the responsiveness of the quantity supplied to a change in the product's price. It is calculated by dividing the percentage change in the quantity supplied by the percentage change in the price. An industry with near infinite elasticity of supply can easily increase the quantity supplied with little limitations due to factors like production costs, resources, or time. #Step 2: Consider Digital Goods and Services#

While it's difficult to find an industry with near-infinite elasticity of supply, digital goods and services are prime examples as they come very close to this concept. This is because digital products like software, e-books, and online courses can be easily produced and replicated with minimal costs and resources as compared to physical goods. #Step 3: Example of a Digital Product with High Elasticity of Supply#
02

One example of a digital product with near-infinite elasticity of supply in the short term is an online course platform. When the price of a course increases and there is higher demand, the platform can easily add more users and deliver the course content to them without significantly increasing production costs or using additional resources. This allows the quantity supplied to be increased almost without limitations in response to an increase in price. #Step 4: Conclusion#

In conclusion, while it's difficult to find an industry with near-infinite elasticity of supply, digital goods and services come close due to their ability to be easily replicated and delivered with minimal costs. An example of a digital product with high elasticity of supply in the short term is an online course platform that can easily increase the quantity of courses supplied as the price increases.

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Most popular questions from this chapter

Suppose you could buy shoes one at a time, rather than in pairs. What do you predict the cross-price elasticity for left shoes and right shoes would be?

Economists define normal goods as having a positive income elasticity. We can divide normal goods into two types: Those whose income elasticity is less than one and those whose income elasticity is greater than one. Think about products that would fall into each category. Can you come up with a name for each category?

If demand is elastic, will shifts in supply have a larger effect on equilibrium quantity or on price?

Would you usually expect elasticity of demand or supply to be higher in the short run or in the long run Why?

The equation for a supply curve is 4P = Q. What is the elasticity of supply as price rises from 3 to 4? What is the elasticity of supply as the price rises from 7 to 8? Would you expect these answers to be the same?
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