Suppose that price elasticity of the long-run supply of restaurant meals is 2.5. If the price of meals increases by 5%, how would that affect the supply?

Question

Quizplus · Accepted Answer

The price elasticity of supply measures how much the quantity supplied responds to a change in price. With an elasticity of 2.5, a 5% increase in price would lead to a 2.5 * 5% = 12.5% increase in supply.

Suppose That Price Elasticity of the Long-Run Supply of Restaurant