Suppose that after a five per cent increase in the price of timber, a forestry company increases its supply of timber by 10 per cent in the next three months, and 15 per cent by 12 months.This means that the elasticity of supply is _____.
A)3 at three months and 2 at 12 months
B)0.5 at three months and 0.3 at 12 months
C)2 at three months and 3 at 12 months
D)0.3 at three months and 0.5 at 12 months

Question

Quizplus · Accepted Answer

The elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. At three months, it's (10%/5%) = 2, and at 12 months, it's (15%/5%) = 3.

Suppose That After a Five Per Cent Increase in the Price