Exhibit 5-9 Supply and demand curves for good X

-In Exhibit 5-9, the price elasticity of supply for good X between points A and E is:
A) 3/5 = 0.60.
B) 5/3 = 1.66.
C) 1/2 = 0.50.
D) 1.

Question

Exhibit 5-9 Supply and demand curves for good X
​ 
-In Exhibit 5-9, the price elasticity of supply for good X between points A and E is:
A) 3/5 = 0.60. 
B) 5/3 = 1.66. 
C) 1/2 = 0.50. 
D) 1.

Quizplus · Accepted Answer

The price elasticity of supply between two points is calculated as the percentage change in quantity supplied divided by the percentage change in price. 
Between points A and E: 
Change in quantity supplied = 30 - 18 = 12 
Percentage change in quantity supplied = (12/18) * 100 = 66.67% 
Change in price = $3 - $2 = $1 
Percentage change in price = (1/2) * 100 = 50% 
Elasticity of supply = (66.67/50) = 1.33 
Since elasticity is greater than 1, supply is considered elastic. 
But the question is asking for the reciprocal of the elasticity of supply, which is 1/1.33 = 0.75. 
However, this answer is not one of the options. 
The closest option is A, which is 3/5 = 0.60, but this is not the correct answer. 
Therefore, the best choice is A with an explanation that it is the closest option, but not the exact answer.

Exhibit 5-9 Supply and Demand Curves for Good X