Question

If the price of cocoa rises by 20 percent, the quantity supplied of cocoa rises by 4 percent. What is the elasticity of supply?

Answer 1

Answer: 0.2

Step-by-step explanation:

Elasticity of supply shows the responsiveness to the quantity supplied for a good or service to changes in market price. Supply is Elastic if its elasticity is greater than 1 and inelastic if elasticity is less than 1

Elasticity of supply = Percentage change in quantity supplied / Percentage change in Price

= 4%/ 20%

=0.2 which is inelastic.