A-LevelEconomicsThe price system and the microeconomy9708/12 · Oct/Nov 2020 · Q131 Mark
A firm estimates that the price elasticity of supply of its product is 0.4. Should the firm be concerned by this figure?
ANo, as it implies that the firm will be able to raise revenue by raising price.
BNo, as it suggests there are few substitutes for the product.
CYes, as it means that demand for its product is increasing at a slow rate.
DYes, as it shows that the firm is not able to adjust supply easily when demand changes.
✓ Correct answer
D: Yes, as it shows that the firm is not able to adjust supply easily when demand changes.
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