When a ride-sharing service implements "surge" pricing, raising all fares by 30%, drivers choose to work longer hours and this results in an increase of 40% more rides available. The price elasticity of supply for ride-sharing is _____, and the supply is _____.
A) 0.75; elastic
B) 0.75; inelastic
C) 1.33; elastic
D) 1.33; inelastic

Question

Quizplus · Accepted Answer

The price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. Here, it's (40% / 30%) = 1.33, indicating that the supply is elastic since the elasticity is greater than 1.

When a Ride-Sharing Service Implements "Surge" Pricing, Raising All Fares