Question

if the quantity of rental units increases by 10 percent when the monthly rental price doubles, the supply of rental units, other factors held constant, is:
a. perfectly elastic.
b. perfectly inelastic.
c. inelastic.
d. elastic.

Explanation:

Step1: Calculate %ΔPrice

A doubling of price means a 100% increase:
$\% \Delta P = 100\%$

Step2: Identify %ΔQuantity

Given quantity increase is 10%:
$\% \Delta Q_s = 10\%$

Step3: Compute Supply Elasticity

Use supply elasticity formula:
$E_s = \frac{\% \Delta Q_s}{\% \Delta P} = \frac{10\%}{100\%} = 0.1$

Step4: Classify Elasticity

Since $0 < E_s < 1$, supply is inelastic.

Answer:

c. inelastic.