Scenario 5.1
The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P x . Assume that P = $8, I = 200, and P x = $10.
-If a 10 percent increase in price leads to a 20 percent increase in the quantity supplied, then the elasticity of supply is 0.5.

Question

Quizplus · Accepted Answer

The elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. Given a 10 percent increase in price leads to a 20 percent increase in quantity supplied, the elasticity of supply is 2.0 (20% / 10%).

Scenario 5.1 The Demand for Noodles Is Given by the Following Equation