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If the supply of a product is inelastic, then: a) a 25 percent change in price will lead to more than 25 percent change in quantity supplied
If the supply of a product is inelastic, then:
a) a 25 percent change in price will lead to more than 25 percent change in quantity supplied.
b) a 25 percent change in price will lead to a 100 percent change in quantity supplied.
c) a 25 percent change in price will lead to less than 25 percent change in quantity supplied.
d) a 25 percent change in price will lead to a 25 percent change in income.
Expert Solution
The correct answer to the given question is option c) a 25 percent change in price will lead to less than 25 percent change in quantity supplied.
The price elasticity of supply for a product is figured out by dividing the percentage change in quantity supplied with the percentage change in price. The supply is said to be inelastic if the magnitude of price elasticity of supply is less than 1. In other words, for the supply to be inelastic, the percentage change in quantity supplied should be less than the percentage change in price. Hence, in the given question, the correct answer should be the option c which states that a 25 percent change in price will lead to less than 25 percent change in quantity supplied.
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