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JAMB Economics 2013 Question 16

Question 16

Elasticity

If the supply of a product is elastic, a small reduction in price will

  1. A.reduce the cost of production.
  2. B.reduce the quantity supplied.
  3. C.increase the quantity supplied.
  4. D.lead to no change in the quantity supplied.
Show the answer and explanation

Answer: B (reduce the quantity supplied.)

Explanation

With elastic supply, producers respond strongly to price, so even a small price fall cuts the quantity supplied a lot.