Suppose the price elasticity of supply for candles is 0.3 in the short run and 1.2 in the long run.If an increase in the demand for candles causes the price of candles to increase by 36%,then the quantity supplied of candles will increase by about
A) 0.8% in the short run and 3.3% in the long run.
B) 1.2% in the short run and 0.3% in the long run.
C) 10.8% in the short run and 43.2% in the long run.
D) 120% in the short run and 30% in the long run.

Question

Quizplus · Accepted Answer

In the short run, the price elasticity of supply (PES) is 0.3, indicating that any change in price would result in a proportionately smaller change in quantity supplied. Therefore, the quantity supplied would increase by approximately:

0.3 x 36% = 10.8%

In the long run, the PES is 1.2, indicating a proportionately larger change in the quantity supplied in response to a change in price. Therefore, the quantity supplied would increase by approximately:

1.2 x 36% = 43.2%

Thus, the correct answer is option C.

Suppose the Price Elasticity of Supply for Candles Is 0