If a 25% change in price results in a 40% change in quantity supplied,then the price elasticity of supply is about
A)0.63,and supply is elastic.
B)0.63,and supply is inelastic.
C)1.60,and supply is elastic.
D)1.60,and supply is inelastic.

Question

Quizplus · Accepted Answer

The price elasticity of supply is calculated as:
% change in quantity supplied / % change in price
Given that a 25% change in price results in a 40% change in quantity supplied, we can say that the % change in quantity supplied is 40/100 = 0.4 and the % change in price is 25/100 = 0.25.

Thus, the price elasticity of supply is:
0.4 / 0.25 = 1.60

Since the result is greater than 1, we can say that supply is elastic, meaning that a change in price has a relatively larger effect on the quantity supplied.

If a 25% Change in Price Results in a 40