The elasticity of supply coefficient for bicycles is estimated to be equal to 1.5.It is expected, therefore, that a 4% increase in price would lead to:
A)a 4% decrease in the quantity of bicycles supplied.
B)a 4% increase in the quantity of bicycles supplied.
C)a 6% decrease in the quantity of bicycles supplied.
D)a 6% increase in the quantity of bicycles supplied.
E)a 1.5% decrease in the quantity of bicycles supplied.

Question

Quizplus · Accepted Answer

The elasticity of supply coefficient of 1.5 means that for every 1% increase in price, the quantity supplied increases by 1.5%. Therefore, a 4% increase in price would lead to a 6% increase in the quantity of bicycles supplied (4% * 1.5 = 6%).

The Elasticity of Supply Coefficient for Bicycles Is Estimated to Be