Quantity supplied rises from 50 units to 70 units while price rises from ₦5 to ₦10. Calculate elasticity of supply:
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Correct Answer: Option A
Explanation:
Formula:<br/>Price Elasticity of Supply (PES) =<br/>% Change in Quantity Supplied ÷ % Change in Price Quantity supplied changed from 50 to 70:<br/>Change = 20 % Change in Quantity Supplied =<br/>20/50 × 100 = 40% Price changed from ₦5 to ₦10:<br/>Change = 5 % Change in Price =<br/>5/5 × 100 = 100% PES = 40% ÷ 100% = 0.4 The supply is inelastic because quantity supplied changed less proportionately than price.
Formula:<br/>Price Elasticity of Supply (PES) =<br/>% Change in Quantity Supplied ÷ % Change in Price Quantity supplied changed from 50 to 70:<br/>Change = 20 % Change in Quantity Supplied =<br/>20/50 × 100 = 40% Price changed from ₦5 to ₦10:<br/>Change = 5 % Change in Price =<br/>5/5 × 100 = 100% PES = 40% ÷ 100% = 0.4 The supply is inelastic because quantity supplied changed less proportionately than price.