The price of lemons increased $10 \%$.
How much did the quantity of lemons increase if the price elasticity of supply of lemons is 2 , and how is that elasticity interpreted?

Choose 1 answer:
(A) $20 \%$; elastic
(B) $2 \%$; elastic
(C) $2 \%$ inelastic
(D) $200 \%$; inelastic
(E) $0.5 \%$; inelastic

Question

The price of lemons increased $10 \%$.
How much did the quantity of lemons increase if the price elasticity of supply of lemons is 2 , and how is that elasticity interpreted?

Choose 1 answer:
(A) $20 \%$; elastic
(B) $2 \%$; elastic
(C) $2 \%$ inelastic
(D) $200 \%$; inelastic
(E) $0.5 \%$; inelastic

Accepted Answer

∻Solution∻ ‖ a ⋮ Definition of Price Elasticity of Supply: The price elasticity of supply (PES) measures the responsiveness of the quantity supplied of a good to a change in its price. It is calculated as the percentage change in quantity supplied divided by the percentage change in price. ‖ ‖ b ⋮ Formula Application: Given that the price elasticity of supply (PES) is 2 and the price of lemons increased by 10%, we can use the formula: $$ PES = \frac{\% \Delta Q_s}{\% \Delta P} $$ Substituting the given values: $$ 2 = \frac{\% \Delta Q_s}{10\%} $$ Solving for $\% \Delta Q_s$: $$ \% \Delta Q_s = 2 \times 10\% = 20\% $$ ‖ ‖ c ⋮ Interpretation of Elasticity: Since the price elasticity of supply is greater than 1 (PES = 2), the supply of lemons is considered elastic. This means that the quantity supplied is highly responsive to changes in price. ‖ ∻Answer∻ ⚹ (A) $20\%$; elastic ⚹ ∻Key Concept∻ ⚹ Price Elasticity of Supply (PES) ⚹ ∻Explanation∻ ⚹ The price elasticity of supply measures how much the quantity supplied of a good responds to a change in its price. In this case, a PES of 2 indicates that the supply is elastic, meaning the quantity supplied increases significantly (by 20%) in response to a 10% increase in price. ⚹◊What is the formula for calculating price elasticity of supply in Microe⍭ Generate me a similar question◊

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