Scenario 5.1
The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P x . Assume that P = $8, I = 200, and P x = $10.
-When the supply elasticity of a product is 2.5, a 10 percent decrease in price will _____ the quantity supplied of the product by _____ percent.
A)increase; 25
B)decrease; 25
C)increase; 2.5
D)decrease; 2.5
E)decrease; 4

Question

Quizplus · Accepted Answer

A 10 percent decrease in price will decrease the quantity supplied by 25 percent because the supply elasticity is 2.5, and the percentage change in quantity supplied is calculated as elasticity multiplied by the percentage change in price (2.5 * 10% = 25%).

Scenario 5.1 The Demand for Noodles Is Given by the Following Equation