How is the price elasticity of supply defined?
AThe percentage change in quantity supplied divided by the percentage change in price
BThe dollar change in quantity supplied divided by the dollar change in price
CThe percentage change in quantity demanded divided by the percentage change in price
DThe percentage change in price divided by the percentage change in quantity supplied
Answer & Solution
Correct answer: A. The percentage change in quantity supplied divided by the percentage change in price
1. Price elasticity of supply measures how responsive quantity supplied is to a price change.
2. It equals the percentage change in quantity supplied divided by the percentage change in price.
3. Option D inverts this ratio, which would not measure supply's responsiveness to price.
4. Measuring in dollars instead of percentages, as in option B, depends on arbitrary units rather than being a pure ratio.
_Source: OpenStax Principles of Microeconomics for AP Courses (CC BY 4.0), Ch 5 "Elasticity", section 5.1 | Price Elasticity of Demand and Price Elasticity of Supply_
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