Question

The graph shows the price of green tea compared to the amount supplied by producers.

A graph titled Supply of Green Tea has quantity supplied on the x-axis, from 0 to 10, and price in dollars on the y-axis, from 0 to 10. A line with positive slope is shown. The line contains 2 points. Point (S 1, P 1) is at (3, 4) and point (S 2, P 2) is at (5, 7).

What does this graph suggest about green tea? Choose two answers.

Green tea is elastic in terms of supply.
Green tea is inelastic in terms of supply.
Green tea is neither elastic nor inelastic.
The supply of green tea changes sharply with the price.
The quantity supplied of green tea does not change sharply with the price.

Answer 1

Answers:
- Green tea is inelastic in terms of supply.
- The quantity supplied of green tea does not change sharply with the price.

Reason: Between (3,4) and (5,7) ΔQ = 2, ΔP = 3. Using the midpoint formula elasticity ≈ (2/4) / (3/5.5) ≈ 0.92 < 1, so supply is inelastic (quantity changes less proportionally than price).