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If the percentage change in quantity supplied of a good is smaller than the percentage change in its price, the supply is said to be:
Arelatively more elastic ($E_s > 1$)
Bperfectly inelastic ($E_s = 0$)
Crelatively less elastic ($0 < E_s < 1$)
Dunit elastic ($E_s = 1$)
Answer & Solution
Correct answer: C. relatively less elastic ($0 < E_s < 1$)
1. $E_s = (\% \text{ change in quantity}) \div (\% \text{ change in price})$.
2. Here the numerator is smaller than the denominator, so the ratio is below 1 but above 0.
3. A value in the range $0 < E_s < 1$ is relatively less-elastic supply.
4. It is not zero because quantity does respond somewhat, so perfectly inelastic is ruled out.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit III "Supply", p.6_
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