If the quantity supplied of candy increases by 10% when the price of candy increases by 20%, which of the following is true?
A) Supply for candy is elastic, and price elasticity of supply = 2.0.
B) Supply for candy is inelastic, and price elasticity of supply = 2.0.
C) Supply for candy is elastic, and price elasticity of supply = 0.5.
D) Supply for candy is inelastic, and price elasticity of supply = 0.5.

Question

Quizplus · Accepted Answer

If the quantity supplied of candy increases by 10% when the price of candy increases by 20%, we can calculate the price elasticity of supply as:
% change in quantity supplied / % change in price
= 10% / 20%
= 0.5
Since the calculated price elasticity of supply is less than 1, supply for candy is considered to be inelastic. Therefore, the correct choice is (D).

If the Quantity Supplied of Candy Increases by 10% When