If a 30 percent change in price causes a 10 percent change in quantity supplied,what do we know about the price elasticity of supply
A)It is 1/3 and supply is elastic.
B)It is 1/3 and supply is inelastic.
C)It is 1 and supply is unit elastic.
D)It is 3 and supply is elastic.

Question

Quizplus · Accepted Answer

The price elasticity of supply is calculated by taking the percentage change in quantity supplied divided by the percentage change in price. In this case, a 30% change in price causes a 10% change in quantity supplied. Therefore:
Price elasticity of supply = (% change in quantity supplied) / (% change in price)
Price elasticity of supply = 10%/30%
Price elasticity of supply = 1/3
Since the price elasticity of supply is less than 1, supply is considered inelastic. Therefore, choice B is the correct answer.

If a 30 Percent Change in Price Causes a 10