2016 WAEC Economics Theory (a) What is price elasticity of supply?(2marks) (b) Differentiate between joint supply and cometitive supply.(6marks)…

Explanation

(a) Price elasticity of supply: it is the degree of responsiveness of quantity supplied of a commodity to a given change in its price OR  it is the percentage change in quantity supplied of a commodity to a percentage change in its price. 

(b) Joint supply occurs when two or more commodities are produced and supplied from one source such that the supply of one commodity will lead to the supply of the other(s). Competitive supply on the other hand occurs when a commodity has alternative uses. An increase in the supply of one of its uses will reduce its supply for other uses.

(c) (i) Time: supply of commodities tends to be more inelastic in the short run and as time elapses, the more elastic it becomes e.g. agricultural produce.
(ii) Cost of production: Commodities with higher cost of production inputs tend to be more inelastic while commodities with lower cost of productive inputs are more elastic because it is cheaper to obtain more inputs to increase supply.
(iii) Nature of the product: Durable commodities tend to have more elastic supply while perishable commodities tend to have inelastic supply because they cannot be stored for long.
(iv) Market discrimination or segmentation: Commodities that can be sold at different prices in different markets tend to be more elastic while supply will be inelastic for commodities that can be sold in only one market.
(v) Availability of storage facilities: commodities that can be stored for a long time tend to have elastic supply while those that cannot be stored tend to have inelastic supply.
(vi) Number of producers: the larger the number of producers, the easier it is to increase output in response to price changes making supply elastic.
(vii) Mobility/availability of factors of production: if factors of production are more mobile the price elasticity of supply tends to be more elastic.