Refer to the figure below. If P = $6, then the price elasticity of supply is:
A)less than zero
B)positive, but less than one
C)one
D)greater than one

Question

Refer to the figure below. If P = $6, then the price elasticity of supply is: 
A)less than zero 
B)positive, but less than one 
C)one 
D)greater than one

Quizplus · Accepted Answer

The price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price. 
In this case, we can see that the quantity supplied increases from Q1 to Q2 as the price increases from $4 to $6. 
Therefore, the percentage change in quantity supplied is [(Q2-Q1)/Q1] x 100% = [(8-4)/4] x 100% = 100%. 
The percentage change in price is [(P2-P1)/P1] x 100% = [(6-4)/4] x 100% = 50%. 
Therefore, the price elasticity of supply is 100%/50% = 2, which is greater than one.

Refer to the Figure Below