Suppose the U.S. demand curve for gasoline shifts rightward, and the U.S. supply curve for gasoline remains unchanged. As a result, the price of gasoline increases by 9 percent, and the equilibrium quantity increases by 3 percent. Which of the following statements is true based on this information?
A) The price elasticity of supply for gasoline is roughly 0.33.
B) The price elasticity of supply for gasoline is roughly 3.
C) The price elasticity of demand for gasoline is roughly 0.33.
D) The price elasticity of demand for gasoline is roughly -3.

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. Given that the quantity supplied increased by 3 percent in response to a 9 percent increase in price, the price elasticity of supply is 0.33 (3% / 9%).