c3b - Percentage change in price For example suppose that...

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3.b. Elasticity of Supply The price of elasticity of supply measures how changes in price affect the quantity supplied. Supply is said to elastic when changes in price greatly affect the quantity supplied. Supply is said to be inelastic when changes in price do not greatly affect the quantity supplied. The price elasticity of supply depends on how easily sellers can change the amount of the good they produce. When it is difficult to change the amount produced supply tends to be elastic, when it is easy to change the amount produced supply tends to be inelastic. The price elasticity of supply is the percentage change in the quantity supplied divided by the percentage change in the price. That is Price elasticity of supply = Percentage change in quantity supplied
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Unformatted text preview: Percentage change in price For example suppose that an increase in price from 6.00 to 6.30 raises the amount produced from 12000 to 13500. Percentage change in price = (6.30 - 6.00)/6.00*100 = 10 percent. Similarly we calculate the percentage change in quantity supplied = (13,500 - 12,0000/12000*100 =15 percent. Price elasticity of supply = 15 percent = 1.5 10 percent 3.b.1 A percentage increase in price leads to a larger percentage increase in quantity supplied. 3.b.2 A percentage increase in price leads to a smaller percentage increase in quantity supplied. 3.b.3 3.b.4 A percentage increase in price leaves the quantity supplied unchanged....
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c3b - Percentage change in price For example suppose that...

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