An increase in the price of T-shirts from $20 to $25 causes an increase in the quantity supplied of T-shirts from 12,000 to 14,000.The price elasticity of supply is:
A) 5/2
B) 2/5
C) -2/5
D) 9/13
E) 13/9

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. The percentage change in quantity supplied is (14,000 - 12,000) / 12,000 = 1/6. The percentage change in price is (25 - 20) / 20 = 1/4. The elasticity is (1/6) / (1/4) = 4/6 = 2/3, which simplifies to approximately 9/13.

An Increase in the Price of T-Shirts from $20 to $25