Suppose the Price Elasticity of Supply for Minivans Is 0

question 8

Multiple Choice

Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in the long run.If an increase in the demand for minivans causes the price of minivans to increase by 5%,then the quantity supplied of minivans will increase by about

• A)1.5% in the short run and 6% in the long run.
• B)6% in the short run and 1.5% in the long run.
• C)16.7% in the short run and 4.2% in the long run.
• D)4.2% in the short run and 16.7% in the long run.

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Definitions:

Foreign Exchange

Foreign money needed to carry out international transactions.

Currency

A system of money in general use in a particular country, facilitating the exchange of goods and services.

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A legal structure for businesses characterized by limited liability for its shareholders, perpetual succession, and the potential to raise capital through the sale of stock.

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The legal responsibility individuals have to fulfill the obligations of debt or other legal responsibilities personally, risking personal assets.