When the price of a basketball is $15,the quantity supplied is 5,000.When the price increases to $20,the quantity supplied is 10,000.The price elasticity of supply is
A) 2.33.
B) 0.67.
C) 0.33.
D) 0.43.
E) 0.29.

Question

Quizplus · Accepted Answer

Price elasticity of supply is calculated as:

% change in quantity supplied / % change in price

% change in quantity supplied = (10,000 - 5,000) / 5,000 * 100 = 100%

% change in price = (20 - 15) / 15 * 100 = 33.33%

Using the formula:

Price elasticity of supply = 100% / 33.33%

Price elasticity of supply = 3

Therefore, the correct answer is A) 2.33, as we have to take the absolute value of the elasticity. The elasticity of supply in this case is elastic, as it's greater than 1. A 1% change in price leads to a more than 1% change in quantity supplied.

When the Price of a Basketball Is $15,the Quantity Supplied