In January the price of widgets was $1.00,and Wendy's Widgets produced 80 widgets.In February the price of widgets was $1.50,and Wendy's Widgets produced 110 widgets.In March the price of widgets was $2.00,and Wendy's Widgets produced 140 widgets.The price elasticity of supply of Wendy's Widgets was about
A)0.79 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to $2.00.
B)1.27 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to $2.00.
C)0.79 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to $2.00.
D)1.27 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to $2.00.

Question

Quizplus · Accepted Answer

The price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. From January to February, the price increased by 50% (from $1.00 to $1.50) and the quantity supplied increased by 37.5% (from 80 to 110). Therefore, the price elasticity of supply is 0.75. From February to March, the price increased by 33.3% (from $1.50 to $2.00) and the quantity supplied increased by 27.3% (from 110 to 140). Therefore, the price elasticity of supply is 0.82.

In January the Price of Widgets Was $1