If the price elasticity of supply is 0.5, a 10 percent increase in price will cause a:
A) 5 percent increase in quantity supplied.
B) 5 percent decrease in quantity supplied.
C) 20 percent increase in quantity supplied.
D) 20 percent decrease in quantity supplied.

Question

Quizplus · Accepted Answer

Price elasticity of supply measures the responsiveness of quantity supplied to a change in price. With an elasticity of 0.5, a 10% increase in price will lead to a 5% increase in quantity supplied (0.5 * 10% = 5%).

If the Price Elasticity of Supply Is 0