Question

The elasticity of a straight line supply curve originating from the origin of the axes is

• A. Less than unity
• B. Greater than unity
• C. Equal to unity
• D. Equal to zero

Hint:

A simple geometric rule for supply elasticity:

Starts from origin = Unitary elastic (e=1)
Starts from the Y-axis (price axis) = Elastic (e>1)
Starts from the X-axis (quantity axis) = Inelastic (e<1)

Answer 1

The Correct Option is C

For any straight-line supply curve that starts from the origin (0,0), the price elasticity of supply is always equal to one (unity). This is because for such a curve, the ratio of price (P) to quantity (Q) is constant and equal to the slope. In the elasticity formula \( PES = (\frac{\Delta Q_s}{\Delta P}) \times (\frac{P}{Q_s}) \), the term \( (\frac{\Delta Q_s}{\Delta P}) \) is the reciprocal of the slope, and the term \( (\frac{P}{Q_s}) \) is the slope itself. They cancel each other out, resulting in an elasticity of 1 at every point on the line.