If a shift in the demand curve that raises the price of oranges from $7 to $9 a bushel increases the quantity of oranges supplied from 4,000 bushels to 6,000 bushels, the statement that is true is

If a shift in the demand curve that raises the price of oranges from $7 to $9 a bushel increases the quantity of oranges supplied from 4,000 bushels to 6,000 bushels, the statement that is true is

• A. Supply of oranges is elastic.
• B. Supply of oranges is inelastic.
• C. Demand for oranges is inelastic.
• D. Demand for oranges is elastic.

Answer: (A)

The key idea here is elasticity of supply—the degree to which quantity supplied responds to a price change. Compute the responsiveness: price rises from 7 to 9, a change of 2 on a base of 7, which is about a 28.6% increase. Quantity supplied grows from 4,000 to 6,000, a change of 2,000 on 4,000, which is a 50% increase. Elasticity of supply is the ratio of these percent changes: Es ≈ 50% / 28.6% ≈ 1.75. Since Es is greater than 1, supply is elastic. The observed strong response of quantity supplied to the price change makes the statement about elastic supply true. The other options refer to demand instead of supply, and the data provided describe how producers respond to a price change, not how consumers respond to price.

The key idea here is elasticity of supply—the degree to which quantity supplied responds to a price change.

Compute the responsiveness: price rises from 7 to 9, a change of 2 on a base of 7, which is about a 28.6% increase. Quantity supplied grows from 4,000 to 6,000, a change of 2,000 on 4,000, which is a 50% increase. Elasticity of supply is the ratio of these percent changes: Es ≈ 50% / 28.6% ≈ 1.75.

Since Es is greater than 1, supply is elastic. The observed strong response of quantity supplied to the price change makes the statement about elastic supply true.

The other options refer to demand instead of supply, and the data provided describe how producers respond to a price change, not how consumers respond to price.