Question

Compute the value of price elasticity of supply. If the percentage in quantity supply is 75% and percentage change in price is 55%.​

Answer 1

Price elasticity of supply = 1.36%

Step-by-step explanation:

Given the following data;

percentage in quantity supply = 75%

percentage change in price = 55%.

To find the the value of price elasticity of supply;

A price elasticity of supply (PES) can be defined as a measure of the responsiveness of the quantity of a product supplied with respect to a change in price of the product, all things being equal.

Mathematically, the price elasticity of supply is given by the formula;

`Price \; elasticity \; of \; supply = \frac {Percentage \; change \; in \; supply}{Percentage \; change \; in \; price}`

Substituting into the formula, we have;

`Price \; elasticity \; of \; supply = \frac {75}{55}`

Price elasticity of supply = 1.36%

Therefore, the degree of elasticity is said to be elastic because the price elasticity of supply (PES) is greater than 1.