13 The price elasticity of supply is always a positive value

13) The price elasticity of supply is always a positive value because i. there is a direct relationship between the price and the quantity supplied. ii. as the equilibrium price increases, the equilibrium quantity also always increases. iii. buyers are willing to pay a higher price for larger quantities. A) i only B) ii only C) iii only D)i and ii E) ii and ii

Solution

Option A is correct.

The relationship between the price of a particular good and its quantity supplied is measured by the law of supply. Accordingly if there is an increase in the price of a product then suppliers are more willing to supply it and so the quantity supplied increases. Hence, there is a direct relationship between the quantity supplied and the price. However buyers are always willing to pay a lower price for larger quantities. However buyers are always willing to pay a lower price for larger quantities because they want a discount to be given to them for making a bulk purchase. Also, if equilibrium price is increased, the equilibrium quantity can increase or decrease or even remain unchanged depending upon the shift in the supply and demand. Therefore only the first statement is correct.