Question

What does this graph suggest about green tea? Check ALL that apply.

Answer 1

The answer would be

2) Green Tea is inelastic in terms of supply

hope this helped :)

Answer 2

The correct answer is 2.

Elasticity measures the sensibility of the quantity supplied or demanded when the price of the product is modified. In this example we will compute the elasticity of the supply function.

The supply function is inelastic in the sense than when a price increase is performed (from P1 to P2) the quantity supplied increases in a lower proportion (from Q1 to Q2). Let's prove this by calculating the percentage increase experienced by each of the two variables:

• Price: (7-4)/4 * 100% = + 75%
• Quantity supplied: (5-3)/3 * 100%= +66.66%

When there is a price increase of the 75%, the quantity supplied increases a 66.66% (<75%).