The larger the coefficient of price elasticity of demand for a product,the:

A) larger the resulting price change for an increase in supply.
B) more rapid the rate at which the marginal utility of that product diminishes.
C) less competitive will be the industry supplying that product.
D) smaller the resulting price change for an increase in supply.

Question

Cheyenne Dreibelbis · Accepted Answer

Final Answer : D, Explanation :  The larger the coefficient of price elasticity of demand for a product, the more sensitive consumers are to changes in price, meaning that even a small increase in price could lead to a relatively large decrease in quantity demanded. As a result, if suppliers were to increase the supply of the product, they would have to lower the price in order to entice consumers to purchase the additional quantity, but due to the high elasticity, the decrease in price would need to be relatively small in order to achieve the desired increase in quantity demanded. Therefore, the resulting price change for an increase in supply would be smaller.

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