If a decline in the price of flags \$9 to \$7, caused by a shift in the demand curve, decreases the quantity of flags supplied from 5,500 to 4,500, the:

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

Answer: (D)

Verified step by step guidance

1. Understand the concept of elasticity: Elasticity measures how much the quantity demanded or supplied responds to changes in price. If the quantity changes significantly with a small change in price, it is elastic. If it changes little, it is inelastic.
2. Identify the given data: The price of flags decreases from \$9 to \$7, and the quantity supplied decreases from 5,500 to 4,500.
3. Calculate the percentage change in price: Use the formula for percentage change, which is ((new value - old value) / old value) * 100. Here, it would be ((7 - 9) / 9) * 100.
4. Calculate the percentage change in quantity supplied: Similarly, use the formula for percentage change, which is ((new quantity - old quantity) / old quantity) * 100. Here, it would be ((4,500 - 5,500) / 5,500) * 100.
5. Determine elasticity: Compare the percentage change in quantity supplied to the percentage change in price. If the percentage change in quantity supplied is less than the percentage change in price, the supply is inelastic.