If the supply curve of a good cuts the price axis in its positive range and as we extend the straight line, it cuts the quantity-axis at its negative range, the elasticity of supply for the good will be:
If the supply curve of a good cuts the price axis in its positive range and as we extend the straight line, it cuts the quantity-axis at its negative range, the elasticity of supply for the good will be:
Solution
Option 3: More than 1 -> For a linear supply curve, the elasticity of supply depends on where the extended line intercepts the axes. When a supply curve cuts the price axis at a positive value and (when extended) cuts the quantity axis at a negative value, it indicates a positive price intercept. According to the geometric method of measuring elasticity: if the supply curve (when extended) intersects the price axis above the origin, the price elasticity of supply is greater than 1 (elastic supply). This is because at any point on such a supply curve, a given percentage change in price leads to a larger percentage change in quantity supplied. -> correct
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