A seller increased the quantity he offered for sale from 200 units to 250 units when the price of his product increased by 12.5%. What is the price elasticity of the supply of his product?
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Correct Answer: Option A
Explanation:
The price elasticity of supply = % change in quantity supplied / % change in price
% change in quantity supplied = 250 - 200 = 50
\(\frac{50}{200}\) x 100 = 25
Therefore, price elasticity of supply = \(\frac{25}{12.5}\) = 2
The price elasticity of supply = % change in quantity supplied / % change in price
% change in quantity supplied = 250 - 200 = 50
\(\frac{50}{200}\) x 100 = 25
Therefore, price elasticity of supply = \(\frac{25}{12.5}\) = 2