Supply adjustment, tax forms and time horizons
| English | 中文 | Pinyin |
|---|---|---|
| ad valorem tax/æd ˈvælɒrəm tæks/ | 从价税 | cóng jià shuì |
| price elasticity of supply/praɪs ɪlæˈstɪsɪti ɒv səˈplaɪ/ | 供给价格弹性 | gōng jǐ jià gé tán xìng |
A decision you can investigate
- A fruit seller can release stored stock immediately but cannot grow another crop overnight. A factory can hire workers, but its building remains fixed this month.
- The economic short run is about fixed factors, not a universal number of days.
Build the explanation
- Supply is willingness and ability to offer quantities at different prices during a period. Own price causes movement; costs, technology, subsidies, disasters and indirect taxes can shift supply. A specific tax is a fixed charge per unit; ad valorem tax 从价税 is a percentage of value.
- PES = percentage quantity-supplied change
- percentage price change. Interpret zero, inelastic below 1, unitary 1, elastic above 1 and perfectly elastic as a horizontal limiting curve. The short run has at least one fixed productive factor; in the long run all factors can be adjusted.
Work through the evidence
- Price rises from 20 to 22, or 10%, and supply from 200 to 230, or 15%: PES=15/10=1.5. Stored stock and spare machinery can support this response. Perishable stock, fixed buildings, immobile staff or licensing delays can constrain it.
- A specific tax of 2 remains 2 per unit at product values 20 and 30. A 10% ad-valorem tax is 2 and 3 respectively. Tax or subsidy shifts net production incentives; the actual price split between buyer and seller still depends on market responsiveness.
What is PES in the supplied data?
Supply rises 15% and price 10%: 15/10 = 1.5.
Test the limits
- A calendar month can be long enough to adjust some processes but not others. Greater time often increases responsiveness, but legal or resource constraints can remain. Higher stocks matter only if they are saleable and can reach buyers.
- Manufactured versus primary products is a contextual comparison, not an absolute rule. A factory at full capacity may respond less immediately than a grower holding usable stock. A revenue ratio is not PES: use quantities and prices.
What is a 10% ad-valorem charge on value 30?
30 × 0.1 = 3.
A legal production constraint necessarily disappears merely because more calendar time passes.
A licence or rule can continue to restrict adjustment.
Apply and explain your answer
- Why can an ad-valorem tax produce a changing per-unit charge?
- The charge is a percentage of product value, so its cash amount changes with that value.
What defines the economic short run?
The definition depends on factor adjustment.
Use the terms precisely
- price elasticity of supply 供给价格弹性: Percentage quantity-supplied response relative to percentage own-price change.
- ad valorem tax: A tax charged as a percentage of a stated value.
Match the terms to their meanings.
Use each term for its stated economic relationship.
Price rises from 20 to 22, or 10%, and supply from 200 to 230, or 15%: PES=15/10=1.5. Stored stock and spare machinery can support this response. Perishable stock, fixed buildings, immobile staff or licensing delays can constrain it. A specific tax of 2 remains 2 per unit at product values 20 and 30. A 10% ad-valorem tax is 2 and 3 respectively. Tax or subsidy shifts net production incentives; the actual price split between buyer and seller still depends on market responsiveness.
A calendar month can be long enough to adjust some processes but not others. Greater time often increases responsiveness, but legal or resource constraints can remain. Higher stocks matter only if they are saleable and can reach buyers. Manufactured versus primary products is a contextual comparison, not an absolute rule. A factory at full capacity may respond less immediately than a grower holding usable stock. A revenue ratio is not PES: use quantities and prices.
Supply is willingness and ability to offer quantities at different prices during a period. Own price causes movement; costs, technology, subsidies, disasters and indirect taxes can shift supply. A specific tax is a fixed charge per unit; ad valorem tax is a percentage of value.