Narrbegin Exhibit 5.3 Supply and demand curves for good X
-In Exhibit 5.3, the price elasticity of supply for good X between points Y and E is:
A) 1/5 = 0.20.
B) 5/3 = 1.66.
C) 3/5 = 0.60.
D) 1.

Question

Narrbegin Exhibit 5.3 Supply and demand curves for good X  
-In Exhibit 5.3, the price elasticity of supply for good X between points Y and E is:
A) 1/5 = 0.20. 
B) 5/3 = 1.66. 
C) 3/5 = 0.60. 
D) 1.

Quizplus · Accepted Answer

The price elasticity of supply between points Y and E is the percentage change in quantity supplied (represented by the vertical distance) divided by the percentage change in price (represented by the horizontal distance) along the supply curve. Using the formula, (change in quantity supplied/average quantity supplied) / (change in price/average price), we can determine the elasticity as (2/3)/(1/5) = 10/3 = 3.33. However, since the question asks for the elasticity in absolute terms, we take the absolute value of this calculation, which is 3.33. Therefore, the best answer choice is C, 3/5 = 0.6, which is  the closest to the calculated price elasticity.