The elasticity of supply coefficient for lobster is estimated to be equal to 0.6. What would a 10 percent decrease in price lead to?
A) a 10 percent decrease in the quantity of lobsters supplied
B) a 6 percent increase in the quantity of lobsters supplied
C) a 6 percent decrease in the quantity of lobsters supplied
D) a 10 percent increase in the quantity of lobsters supplied

Question

Quizplus · Accepted Answer

The elasticity of supply coefficient of 0.6 implies that the percentage change in quantity supplied will be 0.6 times the percentage change in price. Therefore, a 10 percent decrease in price (∆P/Pi = -10%) will lead to a 6 percent decrease in the quantity of lobsters supplied (∆Q/Qi = -0.6 x -10% = 6%). Thus the correct answer is C, a 6 percent decrease in the quantity of lobsters supplied.

The Elasticity of Supply Coefficient for Lobster Is Estimated to Be