If the price elasticity of supply is 0.75, then when the price of Good Y falls by 10 percent, the quantity supplied of Good Y:
A) rises by 7.5 percent.
B) rises by 133 percent.
C) falls by 7.5 percent.
D) falls by 133 percent.

Question

Quizplus · Accepted Answer

The price elasticity of supply measures the responsiveness of quantity supplied to a change in price. A price elasticity of 0.75 means that for a 1% decrease in price, the quantity supplied decreases by 0.75%. Therefore, a 10% decrease in price results in a 7.5% decrease in quantity supplied.

If the Price Elasticity of Supply Is 0