The Figure Above Shows the Supply Curve for Roses

question 22

Multiple Choice

The figure above shows the supply curve for roses.
-Suppose an increase in supply lowers the price from $10 to $8 and increases the quantity demanded from 100 units to 130 units.Using the midpoint method,the elasticity of demand equals

• A) 1.17.
• B) 0.85.
• C) 0.26.
• D) 1.56.
• E) None of the above answers is correct.

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Definitions:

Productivity

A measure of the efficiency of production, often evaluated as the ratio of output to input in the production process.

Income Effect

The change in individuals' consumption patterns due to an increase or decrease in their income, affecting their purchasing power.

Substitution Effect

The economic principle that as the price of a good rises, consumers will replace it with cheaper alternatives, whereas if the price falls, the good will replace more expensive alternatives.

Economic Rent

Income derived from the ownership or control of a scarce resource, exceeding the income that would cause the resource to be brought into use.