The price of a dozen eggs rises from $3 to $4.70. In response to this price change, quantity supplied increases from 100,000 dozen eggs to 127,000 dozen eggs. What is the approximate price elasticity of supply for eggs?
A)1.86
B)3.52
C)0.48
D)2.5

Question

Quizplus · Accepted Answer

Price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price.

Percentage change in quantity supplied = ((127,000 - 100,000)/100,000) x 100% = 27%
Percentage change in price = ((4.70 - 3)/3) x 100% = 56.7%

Price elasticity of supply = 27% / 56.7% = 0.48

Therefore, the approximate price elasticity of supply for eggs is 0.48, which means that quantity supplied is relatively inelastic in response to changes in price. The best choice is C.

The Price of a Dozen Eggs Rises from $3 to $4.70