Is this response too short to be a sentence with a full stop?
In informal contexts, you can put a full stop after incomplete sentences in certain contexts, just like after the word caterpillar in the example above. The reason for this is that the response constitutes a complete thought; hence, it is a sentence at the underlying level, albeit incomplete on the superficial level.
The response is a sentence fragment, which is normally considered an error. What has happened in the example above is as follows: the ‘It is’ has been deleted only at surface level because it is clear in the minds of the writer and reader that there’s the implicit, underlying form, 'It is a caterpillar'. Do note, though, that the comprehensibility of the fragment ‘A caterpillar’ instead of the complete version ‘It’s a caterpillar’ is dependent upon the preceding question which allows for the elision—so it’s not as independent as a full sentence.
In other contexts, however, a sentence fragment is a type of error which you do not want to make, especially in formal writing. This error occurs by putting a punctuation mark which signals the end of a sentence (i.e., a full stop, an exclamation mark, or a colon) even when the constituents preceding the mark do not form at least one clause. You must follow this clause rule for formal genres—and in most informal ones—to avoid making these errors. You can lose marks on your written tasks for English exams such as Cambridge English and IELTS.
Please, read my post How to Employ a Colon for more on clauses, and read my post Full Stop Makes His Point for more on fragmented sentences.
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