Exhibit 19-3

-Refer to Exhibit 19-3. When price decreases from $5.50 to $4.50, the price elasticity of supply is
A)0.
B)0.1.
C)0.5.
D)1.0.
E)5.0.

Question

Exhibit 19-3
 
-Refer to Exhibit 19-3. When price decreases from $5.50 to $4.50, the price elasticity of supply is
A)0. 
B)0.1. 
C)0.5. 
D)1.0. 
E)5.0.

Quizplus · Accepted Answer

The price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. In this case, the quantity supplied increases from 100 to 150 units when the price decreases from $5.50 to $4.50. The percentage change in quantity supplied is (150 - 100) / 100 = 0.5. The percentage change in price is (4.50 - 5.50) / 5.50 = -0.182. Therefore, the price elasticity of supply is 0.5 / -0.182 = -2.75.

Exhibit 19-3 -Refer to Exhibit 19-3. When Price Decreases from $5.50 to Decreases