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A good has a price elasticity of supply of 0.8. Which of the following best describes the effects of a rise in demand for this good?
1. More will be spent on the good
2. More of the good will be made and sold
3. Producer incomes will rise
4. Price rises more than proportionately to the rise in quantity produced
Suggested Answer: A
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30 comments · newest first
JO
Johanna
11 months ago
I think option C makes the most sense here.
ST
Stefania
11 months ago
Definitely think producer incomes will rise too!
MI
Mila
12 months ago
Not sure about that, can we really say more will be made?
HE
Herschel
12 months ago
Totally agree, demand rise will lead to higher prices!
KE
Kenneth
1 year ago
Price elasticity of supply at 0.8 means it's inelastic.
PA
Paola
1 year ago
I'm torn between options A and D. I feel like more will be spent on the good, but I'm not convinced that all four effects will happen.
LU
Luisa
1 year ago
I practiced a similar question where a rise in demand led to increased producer incomes, so maybe options 2 and 3 are definitely part of the answer.
LE
Leonida
1 year ago
I think option 4 might be correct because if demand rises, prices could go up more than the quantity produced, but I'm not entirely sure.
MI
Mitzie
1 year ago
I remember that a price elasticity of supply less than 1 means that supply is inelastic, so producers won't increase output significantly.
IV
Ivette
1 year ago
This question seems straightforward, I think I can answer it confidently.
GA
Gail
1 year ago
The IV route makes the most sense to me since it goes directly into the bloodstream. That should be the fastest.
KI
Kimbery
1 year ago
This question is a piece of cake! With that elasticity, it's clear more will be sold, but the price will spike too. I'm going with C, no doubt about it. Though I do wonder if the producers will use their newfound riches to buy a private jet or something.
CH
Chantay
1 year ago
Haha, more producer income? Time to start my own lemonade stand! But seriously, I think C is the way to go here. The price increase will outpace the rise in quantity, so more revenue all around.
CL
Clorinda
1 year ago
Definitely, C is the answer. It's all about that price increase outpacing the rise in quantity.
RU
Rueben
1 year ago
Definitely, C is the way to go. It's all about that price increase outpacing the rise in quantity.
GR
Gregoria
1 year ago
Starting a lemonade stand sounds like a fun idea! But yes, C is the best option here.
DA
Dalene
1 year ago
I agree, C seems like the correct choice. The price will rise more than the quantity produced.
ED
Edison
1 year ago
Yeah, I think C is the best option too. It makes sense that the price would increase more than the quantity.
IS
Isreal
1 year ago
I agree, C seems like the correct choice. The price will rise more than the quantity produced.
EM
Emeline
2 years ago
I'm not sure, but I think the answer is A) 1 & 2 only.
AM
Amber
2 years ago
I disagree, I believe the answer is D) 1, 2, 3 & 4.
RE
Reuben
2 years ago
Hmm, I'm not sure. 0.8 elasticity means supply is somewhat responsive to price changes. I guess C could be right, but I'm not convinced that producer incomes will necessarily rise. Guess I better brush up on my economics before the exam.
RO
Rolland
1 year ago
User2: Yeah, but I'm not convinced that producer incomes will necessarily rise.
MA
Matthew
1 year ago
User1: I think C could be right, price rises more than proportionately to the rise in quantity produced.
LE
Leonardo
2 years ago
I think the answer is C) 1 & 4 only.
MA
Maxima
2 years ago
Well, this seems straightforward. With a price elasticity of supply of 0.8, I'd say option C is the correct answer. Price will rise more than proportionately, and more will be spent on the good. Sounds like a win-win for the producers!
NE
Nell
1 year ago
Agreed, option C covers all the effects of a rise in demand for a good with a price elasticity of supply of 0.8.
VI
Viki
1 year ago
It's always good for producers when demand goes up. Option C seems like the best choice here.
MA
Marquetta
1 year ago
That's true, and more will be spent on the good as well. Looks like the producers will benefit from this increase in demand.
FR
Francis
2 years ago
I think you're right, option C makes sense. The price will definitely rise more than proportionately.