If the price elasticity of supply for a product is 5,and prices decrease 10 percent then supply will _____
A)increase by 5 percent.
B)increase by 10 percent.
C)increase by 50 percent.
D)decrease by 50 percent.
E)decrease by 3 percent.

Question

Quizplus · Accepted Answer

The price 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 5, a 10 percent decrease in price would lead to a 50 percent decrease in supply, not an increase. This is because the elasticity of 5 means that for every 1 percent change in price, the quantity supplied changes by 5 percent in the opposite direction.

If the Price Elasticity of Supply for a Product Is