An 18 percent increase in the price of small cars results in a 10 percent expansion in the quantity supplied. The supply elasticity in this range equals ________.
A) 9/5
B) 5/9
C) 7/10
D) 4/10

Question

Quizplus · Accepted Answer

The formula for supply elasticity is % change in quantity supplied / % change in price. In this case, the % change in quantity supplied is 10% and the % change in price is 18%. Therefore, the supply elasticity equals (10% / 18%) which simplifies to 5/9. The answer is B.

An 18 Percent Increase in the Price of Small Cars