- Refer to the figure above. The elasticity of supply for a product will be 2 when:
A) a 1 percent decrease in the price causes a 0.2 percent decrease in quantity supplied.
B) a 2 percent decrease in price causes a 1 percent decrease in quantity supplied.
C) a 1 percent decrease in price causes a 2 percent decrease in quantity supplied.
D) a 2 percent decrease in price causes a 2 percent decrease in quantity supplied.

Question

-  Refer to the figure above. The elasticity of supply for a product will be 2 when:
A) a 1 percent decrease in the price causes a 0.2 percent decrease in quantity supplied. 
B) a 2 percent decrease in price causes a 1 percent decrease in quantity supplied. 
C) a 1 percent decrease in price causes a 2 percent decrease in quantity supplied. 
D) a 2 percent decrease in price causes a 2 percent decrease in quantity supplied.

Quizplus · Accepted Answer

Elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. For elasticity to be 2, a 1 percent decrease in price must cause a 2 percent decrease in quantity supplied.

- Refer to the Figure Above