The price of lumber increased by 10 percent and the quantity supplied increased by 20 percent.The supply of lumber is
A) inelastic.
B) perfectly elastic.
C) perfectly inelastic.
D) unit elastic.
E) elastic.

Question

Quizplus · Accepted Answer

The price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. In this case, the price increased by 10% and the quantity supplied increased by 20%, so the elasticity of supply is 20%/10% = 2. An elasticity greater than 1 is considered elastic, indicating that a small change in price leads to a proportionally larger change in quantity supplied. Therefore, the supply of lumber is elastic.

The Price of Lumber Increased by 10 Percent and the Quantity