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Question
The price of a mobile handset has risen in the market. But the dealers have not been able to increase the supply proportionately.
What will be the price elasticity of supply for the mobile handset? Draw the supply curve to indicate the type of elasticity.
Solution
The price elasticity of supply of mobile handsets is less elastic because producers are unable to expand supply proportionately when prices rise. This means that the percentage change in supply is less than the price change. (Es < 1)
In this case, The supply curve will be upward sloping originating from the X axis.
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