A price increase from $43 to $49 results in an increase in quantity supplied from 220 units to 240 units. The price elasticity of supply in this price range is
A)0.3.
B)0.67.
C)1.5.
D)3.33.

Question

Quizplus · Accepted Answer

The price elasticity of supply is calculated using the formula: [(Q2 - Q1) / (Q2 + Q1) / 2] / [(P2 - P1) / (P2 + P1) / 2], where Q1 and Q2 are the initial and final quantities, and P1 and P2 are the initial and final prices. Substituting the given values: [(240 - 220) / (240 + 220) / 2] / [(49 - 43) / (49 + 43) / 2] = 20/230 / 6/92 = 0.67.

A Price Increase from $43 to $49 Results in an Increase