If the elasticity of supply is 2.0, what happens to quantity supplied following a 7 percent increase in price? Quantity supplied increases:
A) 3.5 percent.
B) 2.9 percent.
C) 14 percent.
D) 9 percent.

Question

Quizplus · Accepted Answer

The formula for calculating the percentage change in quantity supplied is:
Percentage change in quantity supplied = Elasticity of supply x Percentage change in price
Therefore, percentage change in quantity supplied = 2.0 x 7% = 14%
Therefore, the quantity supplied increases by 14%.

If the Elasticity of Supply Is 2