Question

If the price elasticity of supply for a window manufacturer is 1.5, a. a 10% increase in the price of windows results in a 15% increase in the quantity of windows supplied. b. supply is considered to be inelastic. c. the manufacturer is likely operating very near capacity. d. All of the above are correct.

Answer 1

A

Step-by-step explanation:

Elasticity of Supply = % change in Quantity ÷ % change in price

let % change in quantity = x

> 1.5 = x ÷ 10

x = 1.5 × 10 = 15%

the supply is elastic because Elasticity = 1.5 and is greater than 1