Economics Elasticity Of Supply Questions
The income elasticity of supply is interpreted as the responsiveness of the quantity supplied to changes in income. It measures the percentage change in quantity supplied divided by the percentage change in income.
If the income elasticity of supply is positive, it indicates that the quantity supplied increases as income increases, suggesting that the good is a normal good. A higher income elasticity of supply suggests a more elastic supply, meaning that the quantity supplied is more responsive to changes in income.
On the other hand, if the income elasticity of supply is negative, it implies that the quantity supplied decreases as income increases, indicating that the good is an inferior good. A lower income elasticity of supply suggests a less elastic supply, meaning that the quantity supplied is less responsive to changes in income.
Overall, the income elasticity of supply helps to understand how changes in income affect the quantity supplied of a particular good or service.