If the price elasticity of supply is 0.8, and price increased by 21 percent, quantity supplied would
A)increase by 26.25 percent.
B)increase by 16.80 percent.
C)decrease by 26.25 percent.
D)decrease by 16.80 percent.

Question

Quizplus · Accepted Answer

The price elasticity of supply formula is percentage change in quantity supplied divided by percentage change in price. So, a 0.8 elasticity with a 21% price increase gives: 0.8 = (Quantity Supplied Change %) / 21%. Solving for Quantity Supplied Change % gives 16.80%.

If the Price Elasticity of Supply Is 0