The number of tonnes of wheat sold rises from 100 million to 200 million tonnes due to an increase in the price of wheat from $500 to $700 per tonne.The numerical value of the price elasticity of supply is therefore:
A)0.25
B)1.25
C)3.5
D)2.0
E)2.5

Question

Quizplus · Accepted Answer

Price Elasticity of Supply = % change in quantity supplied / % change in price

% change in quantity supplied = [(200 million - 100 million)/100 million] x 100% = 100%
% change in price = [(700-500)/500] x 100% = 40%

Price Elasticity of Supply = 100% / 40% = 2.5

Therefore, the best choice is D) 2.0 because it is the closest value provided to 2.5. It is likely that there was an error in the options provided, and 2.5 was meant to be an option instead of 3.5.

The Number of Tonnes of Wheat Sold Rises from 100