Explain what influences the price elasticity of supply of a product. [8]

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Explain what influences the price elasticity of supply of a product. [8]

The price elasticity of supply measures the responsiveness in the quantity supplied of a good in relation to changes in the price of the good. It is calculated by dividing the percentage change in the quantity supplied by the percentage change in the price of the good. If a product were to have a very low price elasticity supply, that would mean that suppliers would find it very difficult to increase or decrease output in relation to price changes in the product, while a product with high price elasticity of supply would be a product where the quantity supplied would have a very strong response to a change in price.
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A number of factors can affect the price elasticity of supply. One such factor is the production time of the product. A very long period of time from the start to the end of the production process will mean that if the product experiences a drastic change in its price, the supplier, despite willingness, would be unable to change the level of output as they are locked into producing the given quantity of the good. Thus, products that take a very long time to produce, such as agricultural goods usually have a lower price elasticity of supply than ...

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