When price rises from $1.50 to $2.50 a unit,the quantity supplied increases from 9,000 to 11,000 units.What is the elasticity of supply when the price is $2 a unit?
A)0.4
B)0.8
C)2.5
D)4.0
E)-0.4

Question

Quizplus · Accepted Answer

The elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. In this case, the percentage change in quantity supplied is (11,000 - 9,000) / 9,000 = 0.2222, and the percentage change in price is (2.50 - 1.50) / 1.50 = 0.6667. Therefore, the elasticity of supply is 0.2222 / 0.6667 = 0.3333, which is closest to choice A, 0.4.

When Price Rises from $1