Scenario 5.1
The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P x . Assume that P = $8, I = 200, and P x = $10.
-Ceteris paribus, if a 20 percent increase in the price of shoes leads to a 10 percent increase in the quantity supplied of shoes, then the price elasticity of supply is equal to _____.
A)2
B)20
C)10
D)0.5
E)0.2

Question

Quizplus · Accepted Answer

Price elasticity of supply (PES) = percentage change in quantity supplied / percentage change in price Given: %ΔP_x = 10% and %ΔPshoes = 20% Using the formula: PES = %ΔP_x / %ΔPshoes PES = 10% / 20% PES = 0.5 Therefore, the price elasticity of supply is equal to 0.5.

Scenario 5.1 The Demand for Noodles Is Given by the Following Equation