At a price of KSh 50 the quantity supplied is 200 units; at KSh 60 it is 260 units. What is the price elasticity of supply?
Answer and explanation
Correct answer: B. 1.5
- Step 1: Percentage change in price = 10/50 = 20%. Step 2. Percentage change in quantity = 60/200 = 30%. Step 3. Elasticity = 30 / 20 = 1.5. Answer: 1.5. Why not the others: 0.67: That is the reciprocal. 30: That is the percentage change in quantity only. 0.3: That divides the percentage change in quantity by 100.
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