If a Large Percentage Increase in the Price of a Good

question 299

Multiple Choice

If a large percentage increase in the price of a good results in a small percentage increase in the quantity supplied of the good, supply is said to be

• A) horizontal.
• B) relatively inelastic.
• C) relatively elastic.
• D) income proof.

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Definitions:

Price Elasticity

A measure of how the quantity demanded of a good or service changes in response to a change in its price.

Unitary Demand

A market condition in which the demand for a product is directly proportional to changes in its price, leading to a constant revenue.

Demand Curve

A graphical representation showing the relationship between the price of a good or service and the quantity demanded for a given period.

Economies of Scale

Cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output.