Question

22: Chapter Agla Print Questions mazpeosr, Section .S2, problem 026 (D:026.05.2-MC - MANKOS) 22. Chapter p mazpeoBr. Section $2, Problem 026 (026.05.2 MC-MANKO) If the price elasticity of supply is 0.8, and price increased by 5%quantity supplied would a, increase by 4%. s increase by 625%. c, decrease by 4% d, decrease by 6.25%. Practice Question 23: Chapter ma2pe08r, Section.51, Problem 034 (ID: 034.05.1-MC - MANKO8) 23. Chapter ma2peo8r, Section 51, Problem 034 (034.05.1- MC-MANK08) Suppose that gasoline prices increase dramatically this month. Lola commutes 100 miles to work each weekday. Over the next few she sells her home and purchases one only 10 miles from her place of employment. These examples illustrate the importance of months, Lola drives less on the weekends to try to save money. Within the year, the availability of substitutes in determining the price elasticity of demand a necessity versus a luxury in determining the price elasticity of demand c the definition of a market in determining the price elasticity of demand 17/23

Answer 1

22) e_s = Percentage change in quantity supplied / Percentage change in price

Let x be the percentage change in quantity supplied. Then, we have:

$\small \Rightarrow 0.8 = \frac{x}{5}$

$\small \therefore x=0.8*5=4$

We also know that price and quantity supplied are positively related. Si, an increase in price causes increase in quantity supplied.

Answer: (a) Increase by 4%

23) Here, we see that Lola finds a substitute home for herself to reduce the number of miles she drives everyday. When there are options available, the demand is more elastic. Thus, our answer is (a).

Answer: (a) The availability of substitutes in determining the price elasticity of demand.