Refer to the Figure Above

question 126

Multiple Choice

Refer to the figure above.The elasticity of supply for a product will be 2 when:

• A) a 1 percent decrease in the price causes a 0.2 percent decrease in quantity supplied.
• B) a 2 percent decrease in price causes a 1 percent decrease in quantity supplied.
• C) a 1 percent decrease in price causes a 2 percent decrease in quantity supplied.
• D) a 2 percent decrease in price causes a 2 percent decrease in quantity supplied.

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Definitions:

Economic Rents

Economic rents refer to the excess payment made to a factor of production over what is needed to bring that factor into its current use.

Natural Gas Extraction

The process of exploring, drilling, and producing natural gas from underground reservoirs.

Imperfectly Elastic

Describes a demand curve that does react to price changes, but not in a perfect one-to-one relationship, indicating some sensitivity to price changes but not to an infinite degree.

Substitute

A good or service that can be used in place of another to satisfy similar needs or desires.