If an increase in price from $1 to $2 per unit leads to an increase in quantity supplied from 20 to 100 units, then the value of price elasticity of supply is
A)0.38
B)2
C)2.67
D)4
E)8

Question

Quizplus · Accepted Answer

Price elasticity of supply (PES) is defined as the percentage change in quantity supplied divided by the percentage change in price.

PES = (% change in quantity supplied) / (% change in price)

In this case, there is a 400% increase in quantity supplied [(100 - 20) / 20 x 100%] when the price increases by 100% [(2 - 1) / 1 x 100%].

Therefore, the PES = 4.

So, the correct option is 4.

If an Increase in Price from $1 to $2 Per