As the price of beachfront cottages in Florida was raised from $400,000 to $500,000, their quantity supplied rose from 2,000 to 2,100. Rounding to the nearest tenth, the elasticity of supply of beachfront cottages is:

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Quizplus · Accepted Answer

The elasticity of supply is calculated using the formula: (percentage change in quantity supplied) / (percentage change in price). The percentage change in quantity supplied is (2,100 - 2,000) / 2,000 = 0.05 or 5%. The percentage change in price is ($500,000 - $400,000) / $400,000 = 0.25 or 25%. Thus, the elasticity of supply is 0.05 / 0.25 = 0.2.

As the Price of Beachfront Cottages in Florida Was Raised