The price elasticity of supply is 0.6. This means that a $10 increase in price w
ID: 1206525 • Letter: T
Question
The price elasticity of supply is 0.6. This means that a $10 increase in price would increase quantity supplied by 60. a 150 percent increase in price would increase quantity supplied by 90 percent. a 50 percent increase in quantity will occur when price increases by 30 percent. a 10 percent increase in quantity will occur when price increases by 6 percent. The most important determinant of price elasticity of supply is the number of close substitutes there arc for the good. the time period firms have to adjust to the new price. the price of the good. the importance of the good in the budgets of consumers. Suppose the price of X increases by 20 percent while the quantity demanded of Y does not change. We would conclude that the two goods are substitutes, but the cross elasticity of demand is not large. the two goods are complements, but the cross elasticity of demand is not large. the two goods are perfect substitutes. the two goods are not related. The cross-price elasticity of demand of products "M" and "N" is zero. This implies that "M" and "N" are substitute products. complementary products. independent products. unique goods, as the price elasticity of demand for one of them is zero. If the price of apples went up by 25 percent, which of the following values of the cross price elasticity for cars would be most reasonable to anticipate? 0.0 1.2 -2.5 -1.0 Suppose a price ceiling is currently set below the equilibrium price. Now suppose that policy makers decide to lower the price ceiling. This reduction in the price ceiling will cause which of the following to occur? The shortage in the market will decrease. The shortage in the market will increase. The surplus in the market will decrease. The surplus in the market will increase.Explanation / Answer
12. D. a 10 percent increase in quantity will occur when price increases by 6 percent.
Elasticity of supply = Percentage change in quantity supplied / Percentage change in price X 100
Since, it is less than one so it means percentage change in quantity supplied is less than the percentage change in price.
13. C) the price of the good
14. D) the two goods are not related as other wise quantity of Y will be affected.
15. C) independent products
16. A) zero as there is no relation between apples and cars
17. A) The shortage in the market will decrease as reduction in the price ceiling increases the price so supply will increase and demand will decrease but demand will be greater than the supply.
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