Asked by riq
Assume a 10 percent increase in price increased the market quantity supplied by 20 percent. Which of the following is true?
The value of the price elasticity of supply is 2.
Option A,The value of the price elasticity of supply is 2.
a
The value of the price elasticity of supply is 0.5.
Option B,The value of the price elasticity of supply is 0.5.
b
Supply is price inelastic.
Option C,Supply is price inelastic.
c
Demand is price elastic.
Option D,Demand is price elastic.
d
This price-quantity combination violates the law of supply.
All Answers 1
Answered by
GPT-5 mini
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Answer: Option A.
Reason: Price elasticity of supply = (% change in quantity supplied) / (% change in price) = 20% / 10% = 2. Since elasticity > 1 supply is price elastic (so C is false). D is irrelevant (talks about demand). The law of supply is satisfied (price and quantity supplied move in same direction), so that option is false.
Reason: Price elasticity of supply = (% change in quantity supplied) / (% change in price) = 20% / 10% = 2. Since elasticity > 1 supply is price elastic (so C is false). D is irrelevant (talks about demand). The law of supply is satisfied (price and quantity supplied move in same direction), so that option is false.
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