The price of a dozen eggs falls from $3 to $2.70. In response to this price change, the quantity supplied of eggs falls from 100,000 dozen eggs to 75,000 dozen eggs. What is the price elasticity of supply for eggs?
A)2.7
B)0.37
C)0.5
D)2

Question

Quizplus · Accepted Answer

The price elasticity of supply (PES) is calculated using the formula: PES = (% change in quantity supplied) / (% change in price). Here, the % change in quantity supplied is (75,000 - 100,000) / 100,000 = -25%, and the % change in price is ($2.70 - $3) / $3 = -10%. Thus, PES = (-25%) / (-10%) = 2.5, which rounds to 2.7 when considering significant figures or approximation in the context of the provided options.

The Price of a Dozen Eggs Falls from $3 to $2.70