If the percentage change in price is 10% and the percentage change in quantity supplied is 5% then the supply for the good is
A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly inelastic.

Question

Quizplus · Accepted Answer

We can use the formula of price elasticity of supply (PES) to determine the elasticity of supply:

PES = (% change in quantity supplied) / (% change in price)

PES = 5% / 10% = 0.5

If PES is less than 1, then supply is inelastic (i.e., the percentage change in quantity supplied is less than the percentage change in price). If PES is greater than 1, then supply is elastic (i.e., the percentage change in quantity supplied is greater than the percentage change in price). If PES equals 1, then supply is unit elastic (i.e., the percentage change in quantity supplied is equal to the percentage change in price).

In this case, PES is 0.5, which means that supply is inelastic. Thus, choice B is the best answer.

If the Percentage Change in Price Is 10% and the Percentage