The price of gluten-free buns falls by 7%. In response, the quantity supplied of gluten-free buns falls by 3.5%. The price elasticity of supply for gluten-free buns is:
A)2.
B)0.5.
C)-0.5.
D)0.33.

Question

Quizplus · Accepted Answer

The price elasticity of supply is calculated by dividing the percentage change in quantity supplied by the percentage change in price. Using the given values, we can calculate the price elasticity of supply as:
(–3.5%) / (–7%) = 0.5
Since the result is positive, we can infer that the supply curve is upward sloping. The magnitude of the elasticity tells us that the quantity supplied is relatively unresponsive to changes in price, indicating that suppliers have a limited ability to adjust their production levels in response to price changes.

The Price of Gluten-Free Buns Falls by 7