If the supply curve for orange juice is estimated to be Q = 40 + 2p,then,at a price of $2,the price elasticity of supply is
A) .01.
B) .09.
C) 1.
D) 11.

Question

Quizplus · Accepted Answer

The price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. At a price of $2, the quantity supplied is Q = 40 + 2p = 40 + 2(2) = 44. If the price increases by 1% to $2.02, the quantity supplied will increase to Q = 40 + 2p = 40 + 2(2.02) = 44.04. The percentage change in quantity supplied is (44.04 - 44) / 44 * 100 = 0.09%. The percentage change in price is (2.02 - 2) / 2 * 100 = 1%. Therefore, the price elasticity of supply is 0.09% / 1% = 0.09.

If the Supply Curve for Orange Juice Is Estimated to Be