If the price rises by 5% and quantity supplied rises by 7%, the elasticity is 1.4, which statement is true?

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Maximize your understanding of demand and supply elasticities with a comprehensive test. Challenge yourself with insightful questions and detailed explanations to enhance your preparation.

Multiple Choice

If the price rises by 5% and quantity supplied rises by 7%, the elasticity is 1.4, which statement is true?

The concept being tested is price elasticity of supply, which shows how much quantity supplied responds to a price change. Here, elasticity is 7% / 5% = 1.4. Since 1.4 is greater than 1, the supply response is proportionally larger than the price change, which means supply is elastic. (If it were less than 1, it would be inelastic; if it were exactly 1, unit elastic.)

If the price rises by 5% and quantity supplied rises by 7%, the elasticity is 1.4, which statement is true?

Maximize your understanding of demand and supply elasticities with a comprehensive test. Challenge yourself with insightful questions and detailed explanations to enhance your preparation.

If the price rises by 5% and quantity supplied rises by 7%, the elasticity is 1.4, which statement is true?

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