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JAMB Economics 2011 Question 16

Question 16

Elasticity

If a firm is faced with an elastic supply curve, its revenue will

  1. A.be supplied at a higher price
  2. B.double at a higher price
  3. C.increase by more than the percentage increase in price
  4. D.equal percentage change in price.
Show the answer and explanation

Answer: C (increase by more than the percentage increase in price)

Explanation

With elastic supply, quantity sold rises by a bigger percentage than price, so revenue rises by more than the percentage rise in price.