Quantity supplied rises from 80 units to 88 units while price rises from ₦40 to ₦50. Calculate elasticity of supply:
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Correct Answer: Option C
Explanation:
Formula:<br/>PES =<br/>% Change in Quantity Supplied ÷ % Change in Price Quantity supplied changed from 80 to 88:<br/>Change = 8 % Change in Quantity Supplied =<br/>8/80 × 100 = 10% Price changed from ₦40 to ₦50:<br/>Change = 10 % Change in Price =<br/>10/40 × 100 = 25% PES = 10% ÷ 25% = 0.4 Since elasticity is less than one, supply is inelastic.
Formula:<br/>PES =<br/>% Change in Quantity Supplied ÷ % Change in Price Quantity supplied changed from 80 to 88:<br/>Change = 8 % Change in Quantity Supplied =<br/>8/80 × 100 = 10% Price changed from ₦40 to ₦50:<br/>Change = 10 % Change in Price =<br/>10/40 × 100 = 25% PES = 10% ÷ 25% = 0.4 Since elasticity is less than one, supply is inelastic.