Recall the Application About How Changes in Supply Affect the Price

question 161

Multiple Choice

Recall the Application about how changes in supply affect the price of gasoline to answer the following question(s) .
-Recall the Application. Suppose the price elasticity of demand for gasoline is 0.20 and the price elasticity of supply for gasoline is 0.55. If supply increases by 20 percent, the equilibrium price will decrease by

• A) 27 percent.
• B) 57 percent.
• C) 175 percent.
• D) 375 percent.