An increase in the price of pure chocolate morsels from $2.25 to $2.45 causes suppliers of chocolate morsels to increase their quantity supplied from 125 bags per minute to 145 bags per minute.Supply is
A) elastic,and the price elasticity of supply is 1.74.
B) elastic,and the price elasticity of supply is 0.57.
C) inelastic,and the price elasticity of supply is 1.74.
D) inelastic,and the price elasticity of supply is 0.57.

Question

Quizplus · Accepted Answer

A change in price from $2.25 to $2.45 results in an increase in quantity supplied from 125 bags per minute to 145 bags per minute, which is a percentage change of [(145-125)/((125+145)/2)]/[(2.45-2.25)/(2.35)] = 1.74. Since the price elasticity of supply is greater than 1, the supply is elastic. Therefore, the correct answer is A.

An Increase in the Price of Pure Chocolate Morsels from $2.25