question archive A 6 percent increase in the price of a good increased the quantity supplied of the good by 3 percent after one month
A 6 percent increase in the price of a good increased the quantity supplied of the good by 3 percent after one month
Subject:EconomicsPrice:2.88 Bought3
A 6 percent increase in the price of a good increased the quantity supplied of the good by 3 percent after one month.
Supply of this good is_.
A. decreasing
B. increasing
C. unit elastic
D. elastic
E. inelastic
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The correct answer is: D. elastic.
The price elasticity of supply is calculated as:
The supply for a good or service is said to be elastic if:
and inelastic if:
From our question, if an increase in price by 6% causes an increase in the quantity supplied by 3%, then the price elasticity of supply is:
Therefore, the supply for this good is elastic.
