If a 1 percent decrease in the price of squash results in a larger percentage decrease in the quantity supplied, the supply is

If a 1 percent decrease in the price of squash results in a larger percentage decrease in the quantity supplied, the supply is

• A. Demand is inelastic.
• B. Demand is elastic.
• C. Supply is inelastic.
• D. Supply is elastic.

Answer: (D)

Elasticity of supply measures how much quantity supplied responds to a price change. If a 1 percent drop in price leads to a larger percentage drop in the quantity supplied, the supply elasticity is greater than one in absolute value, indicating elastic supply. This means producers reduce output more than proportionally when price falls, showing a strong responsiveness to price changes. If the quantity moved by less than the price change, the supply would be inelastic; if it moved by the same amount, it would be unit elastic.

Elasticity of supply measures how much quantity supplied responds to a price change. If a 1 percent drop in price leads to a larger percentage drop in the quantity supplied, the supply elasticity is greater than one in absolute value, indicating elastic supply. This means producers reduce output more than proportionally when price falls, showing a strong responsiveness to price changes. If the quantity moved by less than the price change, the supply would be inelastic; if it moved by the same amount, it would be unit elastic.