When the price of a textbook is $95,the quantity of textbooks supplied is 90 million a year and when the price rises to $105,the quantity of textbooks supplied is 110 million a year.The supply of textbooks is
A) elastic
B) perfectly elastic
C) inelastic
D) perfectly inelastic
E) unit elastic.

Question

Quizplus · Accepted Answer

The formula for price elasticity of supply (PES) is:
% change in quantity supplied / % change in price

Using the information given, we can calculate the PES as follows:
% change in quantity supplied = (110 million - 90 million) / 90 million x 100% = 22.22%
% change in price = ($105 - $95) / $95 x 100% = 10.53%

PES = 22.22% / 10.53% = 2.11

Since the PES value is greater than 1, the supply of textbooks is elastic. This means that a change in price will cause a relatively larger change in the quantity supplied.

When the Price of a Textbook Is $95,the Quantity of Textbooks