If the percentage change in price is 5% and the percentage change in quantity supplied is 10% then the supply for the good is
A)Elastic
B)Inelastic
C)Unit elastic
D)Perfectly inelastic

Question

Quizplus · Accepted Answer

The formula to calculate price elasticity of supply is percentage change in quantity supplied divided by percentage change in price. 
Here, percentage change in price is given as 5% and percentage change in quantity supplied is given as 10%. Now,

Price elasticity of supply = percentage change in quantity supplied / percentage change in price 
= 10% / 5%
= 2

As the price elasticity of supply is greater than 1, the supply is considered as elastic. Hence, the correct choice is A) Elastic.

If the Percentage Change in Price Is 5% and the Percentage