If the price elasticity of supply is 1.5,and a price increase led to a 3% increase in quantity supplied,then the price increase amounted to
A) 0.2%.
B) 0.5%.
C) 2%.
D) 4.5%.

Question

Quizplus · Accepted Answer

Using the formula for price elasticity of supply:

Price Elasticity of Supply = % change in quantity supplied / % change in price

Since we know that the price elasticity of supply is 1.5, we can plug in the given information:

1.5 = 3% / % change in price

Solving for the % change in price:

% change in price = 3% / 1.5 = 2%

Therefore, the price increase amounted to 2%.

If the Price Elasticity of Supply Is 1