Question:
If the price elasticity of supply is less than one, this means the
(1) change in quantity supplied is greater than the change in price.
(2) percentage change in quantity supplied is greater than the percentage change in price.
(3) change in quantity supplied is less than the change in price.
(4) percentage change in quantity supplied is less than the percentage change in price.
(5) percentage change in quantity supplied is less than the change in price.
Correct Answer:
(4)
Answer Explanation:
Price Elasticity of Supply (PES) is calculated as the % change in quantity supplied divided by the % change in price. If PES < 1 (inelastic supply), the numerator must be smaller than the denominator. Therefore, the percentage change in quantity supplied is less than the percentage change in price.
Topic: Elasticity Year: 2017
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