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Suppose the price elasticity of supply has been calculated as 0.80 for a particular product and the price increases by 5%. What would happen to the quantity supplied

Respuesta :

When price increases by 5%, quantity supplied increases by 4%.

What is the change in the quantity supplied?

Price elasticity of supply measures the responsiveness of quantity supplied to changes in price of the good. There is a positive relationship between price and quantity supplied

Price elasticity of supply = percentage change in quantity supplied / percentage change in price

0.80 = percentage change in quantity supplied / 5%

percentage change in quantity supplied = 5% x 0.80 = 4%

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