If the elasticity of supply is 4, a 10 per cent increase in the price of a good leads to a
A) 4 per cent decrease in the quantity demanded.
B) 2.5 per cent increase in the quantity supplied.
C) 40 per cent increase in the quantity supplied.
D) 2.5 per cent decrease in the quantity demanded.

Question

Quizplus · Accepted Answer

The elasticity of supply measures how much the quantity supplied of a good responds to a change in the price of that good. With an elasticity of 4, a 10 per cent increase in price leads to a 40 per cent increase in the quantity supplied (Elasticity = percentage change in quantity supplied / percentage change in price, so 4 = x% / 10%, x = 40%).

If the Elasticity of Supply Is 4, a 10 Per