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

Question

Quizplus · Accepted Answer

Elasticity of supply measures how much the quantity supplied responds to changes in price. An elasticity of 4 means that for every 1% increase in price, the quantity supplied increases by 4%. Therefore, a 10% increase in price leads to a 40% increase in the quantity supplied.

If the Elasticity of Supply Is 4, a 10 Percent