Question

If the price elasticity of supply is 1.75, by what percentage will the firm want to increase production if price increases by 10%?

option a: 17.5%
option b: 7%
option c: 5.7%
option d: 12.5%

Answer 1

The firm would want to increase production by 17.5% if the price increases by 10%, due to a price elasticity of supply of 1.75.

Step-by-step explanation:

The question concerns the concept of price elasticity of supply, which is a measure of how much the quantity supplied of a good changes in response to a change in price. In this case, the price elasticity of supply is 1.75, meaning that for each 1% increase in price, the quantity supplied will increase by 1.75%. Therefore, if the price increases by 10%, the quantity supplied will increase by 17.5%, which corresponds to option A.