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Question
Macroeconomics
Posted 3 months ago

When the percentage change in price equals the percentage change in quantity supplied, how do we describe that elasticity?

Choose 1 answer:
(A) Inelastic
B) Perfectly inelastic
(C) Perfectly elastic
(D) Elastic
(E) Unit elastic
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Answer from Sia
Posted 3 months ago
Solution
a
Elasticity Definition: Elasticity measures how much the quantity demanded or supplied responds to changes in price
b
Price Elasticity of Supply (PES): The PES is calculated as the percentage change in quantity supplied divided by the percentage change in price. The formula is PES=%ΔQs%ΔP PES = \frac{\% \Delta Q_s}{\% \Delta P}
c
Unit Elastic Supply: When the PES equals 1, it means that the percentage change in quantity supplied is equal to the percentage change in price, which is known as unit elastic supply
Answer
E) Unit elastic
Key Concept
Unit Elastic Supply
Explanation
When the percentage change in quantity supplied is equal to the percentage change in price, the supply is described as unit elastic.

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