If a 15% change in price results in a 20% change in quantity supplied, then the price elasticity of supply is about
A) 1.33, and supply is elastic.
B) 1.33, and supply is inelastic.
C) 0.75, and supply is elastic.
D) 0.75, and supply is inelastid.

Question

Quizplus · Accepted Answer

To calculate price elasticity of supply, we use the formula:
% change in quantity supplied / % change in price

In this case, we are told that a 15% change in price results in a 20% change in quantity supplied. So:

% change in quantity supplied = 20%
% change in price = 15%

Substituting these values in the formula:
Price elasticity of supply = 20% / 15% = 1.33

Since the value is greater than 1, supply is elastic.

If a 15% Change in Price Results in a 20