Question

What is the price elasticity associated with the straight line supply curve passing through the origin? Explain with a diagram.

Answer 1

When a straight line supply curve passes through the origin, the Price Elasticity of Supply (Es) equals 1, showing unitary elasticity of supply. 

Reason for Unitary Elasticity:

1. Proportional Response: At each point on the supply curve, the percentage change in quantity supplied equals the percentage change in price.
2. Constant Slope: Although the supply curve's slope is constant, the elasticity is always one as the line passes through the origin because the price-quantity ratio remains constant along the curve.

`E_s = (%"Change in Quantity Supplied")/(%"Change in Price")`

For a supply curve passing through the origin: 

`E_s = ((DeltaQ)/Q)/((DeltaP)/P) = 1`

• The X-axis represents Quantity Supplied (Q).
• The Y-axis represents Price (P).
• The straight line SS passes through the origin, showing a direct proportional relationship.