IAI's May, 2015 exam Q5

case of inverse relation between Quantity Supplied and Price.

If P is price and Q is quantity supplied, then which of the following equations gives a price elasticity of supply of 1 at all quantities.?
A. P = x – Q (for x > Q)
B. P = 1/Q
C. P = x + Q

here answer is B, so is there any case where Quantity Supplied and Price inversely related?

 

No, because we always assume that quantity supplied increases with price and so the supply curve slopes upwards.

P = 1/Q gives a downward-sloping curve. It is actually the equation of a downward-sloping demand curve with an elasticity of -1 at all points along it.

elasticity = dQ/dP * P/Q

So, for P=1/Q, Q=1/P and dQ/dP = -1/P^2

and:

elasticity = -1/P^2 *P/(1/P) = -1

Seems like a bit of an "odd" question!

 

Thanks Whippet!
So, now I can say it was just mathematically correct but illogical.