Exhibit 5-21 What is the price elasticity of supply between $10 and $20 on supply curve S in Exhibit 5-21?
A)0
B)infinity
C)1
D)2
E)10

Question

Exhibit 5-21  What is the price elasticity of supply between $10 and $20 on supply curve S in Exhibit 5-21?
A)0 
B)infinity 
C)1 
D)2 
E)10

Quizplus · Accepted Answer

The price elasticity of supply is calculated by dividing the percentage change in quantity supplied by the percentage change in price. In this case, there is a discrete supply curve, which means that the elasticity between any two points is simply the ratio of the change in quantity supplied to the change in price between those points. 
Between $10 and $20, the quantity supplied changes from 60 to 120, which is a 100% increase. The price changes from $10 to $20, which is also a 100% increase. Therefore, the elasticity is 100%/100% = 1. Thus, the answer is C.

Exhibit 5-21 What Is the Price Elasticity of Supply