alleryThe price of a good rises by 8% and the quantity supplied of it rises by 12%. The elasticity of supply equals:
A0.67
B0.96
C4.0
D1.5
Answer & Solution
Correct answer: D. 1.5
1. $E_s = \dfrac{\% \text{ change in quantity supplied}}{\% \text{ change in price}}$.
2. Substitute: $E_s = \dfrac{12}{8}$.
3. $E_s = 1.5$.
4. Dividing the wrong way would wrongly give 0.67.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit III "Supply", p.5_
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