100 units of a product were supplied by sellers at a price of $20 per unit, but only 70 units are supplied because the price fell to $16. The price elasticity of supply for this product is:

Question

Quizplus · Accepted Answer

The price elasticity of supply is calculated using the formula: [(Q2 - Q1) / (Q2 + Q1) / 2] / [(P2 - P1) / (P2 + P1) / 2], where Q1 and Q2 are the initial and final quantities supplied, and P1 and P2 are the initial and final prices. Substituting the given values: [(70 - 100) / (70 + 100) / 2] / [($16 - $20) / ($16 + $20) / 2] = -30/85 / -4/18 = 0.353 / 0.222 = 1.59, which rounds to 1.5, making option C correct.

100 Units of a Product Were Supplied by Sellers at a Price