Question

When price of a product increases by 30% its quantity supplied rises by 15%. What is the elasticity of supply of the commodity?

Answer 1

% Change in Quantity Supplied = 15% (rises)

% Change in Price = 30% (increase)

E_s = `("% Change in Quantity Supplied")/("% Change in Price")`

= `(15%)/(30%)`

= `1/2`

= 0.5

The price elasticity of supply is 0.5.