If a 25% change in price results in a 40% change in quantity supplied,then the price elasticity of supply is
A) 0.63,and supply is elastic.
B) 0.63,and supply is inelastic.
C) 1.60,and supply is elastic.
D) 1.60,and supply is inelastic.

Question

Quizplus · Accepted Answer

Price elasticity of supply (PES) = (% change in quantity supplied) / (% change in price) 
PES = 40% / 25% = 1.6
Since PES is greater than 1, supply is elastic. Option C is the only one that matches both the calculated PES and classification of supply elasticity. Therefore, the answer is C.

If a 25% Change in Price Results in a 40