A price elasticity of supply of 1.5 implies that
A)a 20 percent increase in the quantity supplied increases the price by 30 percent.
B)total revenue is 1.5 times total cost.
C)a 20 percent increase in the price increases the quantity supplied by 30 percent.
D)a 20-unit increase in supply reduces the price by $30.
E)a $20 increase in the price increases the quantity supplied by 30 units.

Question

Quizplus · Accepted Answer

A price elasticity of supply of 1.5 means that a 1% change in price will result in a 1.5% change in quantity supplied. Therefore, a 20% increase in price will result in a 30% increase in quantity supplied (20% x 1.5 = 30%).

A Price Elasticity of Supply of 1