A straight line positively sloped supply curve which intersects the price-axis implies:

Question

Accepted Answer

The correct option is 2: es > 1 Price Elasticity of Supply ($e_s$) measures the responsiveness of the quantity supplied of a good to a change in its price. For a linear supply curve (a straight line), the elasticity of supply can be determined by where the curve originates. The formula for point elasticity of supply is $(P/Q) imes (dQ/dP)$, where $dQ/dP$ is the slope of the supply curve (which is constant for a straight line). When a straight-line, positively sloped supply curve intersects the price-axis (Y-axis), it means that the quantity supplied (Q) is zero at a positive price (P > 0). At any point on this curve, the percentage change in quantity is greater than the percentage change in price necessary to reach that quantity (when measuring from the origin to the point of intersection on the Q-axis). Geometrically, any straight-line supply curve passing through the price-axis will have an elasticity greater than 1, meaning the supply is relatively elastic. The incorrect option is 1: es = 1 A straight-line supply curve has an elasticity equal to one ($e\_s = 1$) only if it passes exactly through the origin (0,0). In this case, the ratio $P/Q$ changes proportionally to the ratio $dQ/dP$ along the line, ensuring that elasticity remains unitary regardless of the specific price and quantity, but this requires it to start at the origin. The incorrect option is 3: es \< 1 A straight-line supply curve has an elasticity less than one ($e\_s \< 1$), meaning supply is relatively inelastic, if it intersects the quantity-axis (X-axis) at a positive quantity (Q \> 0). This indicates that suppliers are willing to supply some quantity even at a price of zero, which is not what a curve intersecting the price-axis implies. The incorrect option is 4: es = 0 An elasticity of zero ($e\_s = 0$) represents perfectly inelastic supply. This is shown by a vertical supply curve, indicating that the quantity supplied remains fixed regardless of any change in price. This shape does not match the description of a positively sloped, straight line curve.