Suppose that the price of product X rises by 20 percent and the quantity supplied of X increases by 15 percent. The coefficient of price elasticity of supply for good X is
A)negative, and therefore X is an inferior good.
B)positive, and therefore X is a normal good.
C)less than 1, and therefore supply is inelastic.
D)more than 1, and therefore supply is elastic.

Question

Quizplus · Accepted Answer

The coefficient of price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. Here, it is 15% / 20% = 0.75, which is less than 1, indicating that the supply is inelastic.

Suppose That the Price of Product X Rises by 20