An 36 percent increase in the price of small cars results in a 20 percent increase 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

Elasticity of supply = (% change in quantity supplied)/(% change in price)
Given, % change in price = 36%
And % change in quantity supplied = 20%
By substituting in the elasticity of supply formula, we get:
Elasticity of supply = (20%/36%) = 5/9

An 36 Percent Increase in the Price of Small Cars