What will be the elasticity of supply if specialised factors of production are used?
Answer & explanation
Correct answer: option 2
The correct answer is Option 2: inelastic
When specialised factors of production are used, the elasticity of supply tends to be low or inelastic because:
- Limited adaptability: Specialised factors such as highly skilled labour, specialised machinery, or rare raw materials cannot be easily shifted to the production of other goods.
- Slow adjustment in production: Even if price or demand increases, firms cannot quickly expand output because specialised resources are not readily available.
- Low responsiveness of supply: Since quantity supplied does not increase significantly in response to price changes, the supply curve becomes relatively steeper, indicating inelastic supply.
Note: Some students may consider “less elastic” conceptually similar to “inelastic” because both indicate lower responsiveness of supply to price changes. However, in economics, “inelastic” is the standard technical classification used when elasticity of supply is less than one, whereas “less elastic” is only a comparative expression and not a formal category by itself.