The price elasticity of supply for umbrellas is 2.Suppose you are told that following a price increase, quantity supplied increased by 30 per cent.What was the percentage change in price that brought this about?
A)60 per cent
B)15 per cent
C)6)7 per cent
D)impossible to determine without additional information

Question

Quizplus · Accepted Answer

Using the formula for price elasticity of supply: 
Price Elasticity of Supply = % change in quantity supplied / % change in price

We know that the price elasticity of supply for umbrellas is 2: 
2 = 30% / % change in price

Solving for % change in price: 
% change in price = 30% / 2 = 15%

Therefore, the percentage change in price that brought about the 30% increase in quantity supplied is 15%. The correct answer is option B.

The Price Elasticity of Supply for Umbrellas Is 2