Suppose that the value of the supply elasticity of a product is 2 and its price decreases by 14%.What will happen to the quantity supplied?
A)It will increase by 7%.
B)It will increase by 28%.
C)It will decrease by 7%.
D)It will decrease by 28%.
E)It cannot be determined without further information.

Question

Quizplus · Accepted Answer

The quantity supplied will decrease by 28%. This is because the supply elasticity formula is percentage change in quantity supplied divided by percentage change in price. With an elasticity of 2 and a price decrease of 14%, the quantity supplied decreases by 2 * 14% = 28%.

Suppose That the Value of the Supply Elasticity of a Product