Suppose a 4 per cent increase in price results in a 2 per cent increase in the quantity supplied of a good.Calculate the price elasticity of supply and characterise the product.
A)2; The product is elastic.
B)0)2; The product is inelastic.
C)0)5; The product is inelastic.
D)50%; The product is inelastic.

Question

Quizplus · Accepted Answer

The price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. Here, it is 2% / 4% = 0.5. A value less than 1 indicates that the product is inelastic.

Suppose a 4 Per Cent Increase in Price Results in a 2