Suppose the price elasticity of supply for how-to books is 0.3 in the short run and 1.2 in the long run.If an increase in the demand for how-to books causes the price of how-to books to increase by 36%,then the quantity supplied of how-to books will increase by
A) 0.8% in the short run and 3.3% in the long run.
B) 1.2% in the short run and 0.3% in the long run.
C) 10.8% in the short run and 43.2% in the long run.
D) 120% in the short run and 30% in the long run.

Question

Quizplus · Accepted Answer

Using the formula for percentage change in quantity supplied, we have:
%ΔQS = %ΔP x E

where %ΔQS is the percentage change in quantity supplied, %ΔP is the percentage change in price, and E is the price elasticity of supply.

In the short run, %ΔQS = 0.3 x 36% = 10.8%

In the long run, %ΔQS = 1.2 x 36% = 43.2%

Therefore, the correct answer is C, which states that the quantity supplied of how-to books will increase by 10.8% in the short run and 43.2% in the long run.

Suppose the Price Elasticity of Supply for How-To Books Is