Question

The price of chocolates increased during the Valentine week in February leading to an increase in the supply at a greater rate.

Identify the price elasticity of supply and illustrate it on a diagram.

Answer 1

The situation is about what would happen if the supply of candies grew faster, since their price would go up during Valentine’s Week. This means that the supply is highly elastic, as the Price Elasticity of Supply (PES) is greater than 1.

Here is a graphical representation of the highly elastic supply scenario where the supply of chocolates increases significantly in response to a price rise during Valentine’s week.