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The price elasticity of supply of a good...

The price elasticity of supply of a good is 0.8. Its price rises by 50 percent. Calculate the percentage increase in its supply

Text Solution

Verified by Experts

`e_(s) = 0.8`
DP = 50%
DQ =?
`e_(s) = ("Percentage Change in Quantity Supplied")/("Percentage Change in Price")`
or, `0.8 = (Delta Q)/(50)`
or, `Delta Q = 40%`
Percentage Change in Quantity Supplied is 40%
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