If an increase in price from $1 to $2 per unit leads to an increase in quantity supplied from 20 to 100 units
then the value of price elasticity of supply is.
a. 0.38
b. 2
c. 2.67
d. 4
e. 8
Use this definition:
PEoS = (% Change in Quantity Supplied)/(% Change in Price)
= 400%/100% = __?
the answer is 2 (b) thanks!
It seems to me that it is 4 (d)
The teacher verified that the answer is b not d.
The price elasticity of demand for cigarettes is estimated to be (-.4) and the income elasticity is about (+5).
a- Suppose the government impose a tax on cigarettes so the price rises by 10%. Estimate the effect this price increase will have on cigarettes consumption and consumer spending on cigarettes. (both in percentage terms)
To calculate the price elasticity of supply, you need to use the formula:
Price Elasticity of Supply = (% change in quantity supplied) / (% change in price)
To calculate the % change in quantity supplied, use the formula:
% change in quantity supplied = (new quantity supplied - original quantity supplied) / original quantity supplied * 100
And to calculate the % change in price, use the formula:
% change in price = (new price - original price) / original price * 100
Let's calculate the values:
% change in quantity supplied = (100 - 20) / 20 * 100 = 400%
% change in price = (2 - 1) / 1 * 100 = 100%
Now, plug the values into the price elasticity of supply formula:
Price Elasticity of Supply = (400% / 100%) = 4
Therefore, the value of price elasticity of supply is 4.
So, the answer is option d. 4.