Suppose the value of the price elasticity of supply is 4.What does this mean?
A)A 4 percent increase in the price of the good causes quantity supplied to increase by 1 percent.
B)A 1 percent increase in the price of the good causes the supply curve to shift upward by 4 percent.
C)A 1 percent increase in the price of the good causes quantity supplied to increase by 4 percent.
D)For every $1 increase in price, quantity supplied increases by 4 units.

Question

Quizplus · Accepted Answer

A price elasticity of supply of 4 means that a 1 percent increase in price will lead to a 4 percent increase in quantity supplied. This indicates that the supply is relatively elastic, meaning that the producers are able to respond quickly to changes in price.

Suppose the Value of the Price Elasticity of Supply Is