WAEC Economics 2016 Theory — Question 5

Model answer

(a) Price elasticity of supply: This can be defined as the degree of responsiveness of quantity supplied to changes in price. It is the proportion of percentage change in quantity supplied to percentage change in price. It can be calculated as: Price elasticity of supply = (Percentage change in quantity supplied) / (Percentage change in price) (b) Joint supply is a supply in which two goods are supplied together, e.g. a cow supplies both hide and meat. Competitive supply is supply of goods which are substitutes to each other, e.g. two brands of a similar product compete for the same resources used in production. (c) Determinants of elasticity of supply: (i) Price of the commodity: The price of the commodity determines how much of the goods the supplier will be willing to sell at a particular time. (ii) Price of other close substitutes: Also, the price of other goods that compete with the goods will determine its quantity that the supplier will supply at any particular time. (iii) Cost of production: The cost of producing goods can determine the elasticity because the cost of production will determine the quantity of the goods the supplier will supply at any particular time. (iv) Availability of raw materials: The volume of raw materials available can also determine the elasticity because it will determine output level at each time.