Question

Indicate if the statement is true or false. If false please explain.

The own-price elasticity of supply could be negative or positive depending on the price being charged and the quantity being purchased.

Answer #1

False.

Explanation :

Price elasticity of supply is responsiveness of supply in change of price.

The law of supply states that, when price increases supply increases and when price decreases, supply decreases, so as we see supply and price moves into same direction that is they are positively related price elasticity of supply can not be negative.

Price elasticity of supply =percentage change in quantity supplied /percentage change in price.

So, it can not be negative, it will be positive.

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