If a 4% increase in price leads to a increase in the quantity supplied of 8% ?
Correct answer: A. Supply is price elastic
- A. Supply is price elastic
- B. Supply is income elastic
- C. Price elasticity of demand is -2
- D. Price elasticity of supply is -2
Explanation
Price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price: 8% ÷ 4% = 2. Since its absolute value exceeds one, supply is price elastic.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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