If the price of corn increases by 20 percent and the quantity supplied of corn increases by 30 percent,then supply is
A) elastic and the elasticity of supply equals 1.5.
B) inelastic and the elasticity of supply equals 1.5.
C) elastic and the elasticity of supply equals 0.66.
D) inelastic and the elasticity of supply equals 0.66.
E) either elastic or inelastic, but more information about the elasticity of demand is needed to determine which.

Question

Quizplus · Accepted Answer

When the price of corn increases by 20%, and as a result, the quantity supplied of corn increases by 30%, it means that the percentage change in quantity supplied is greater than the percentage change in price. Therefore, supply is elastic. The formula for calculating the elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price, which gives us 1.5.

If the Price of Corn Increases by 20 Percent and the Quantity