When the price of canned pickle juice increased $50 \%$, the quantity supplied of pickle juice increased $40 \%$.

What is the price elasticity of supply, and how is that value interpreted?

Choose 1 answer:
(A) 0.10 ; unit elastic
(B) 1.25 ; elastic
(C) 0.8 ; inelastic
(D) 0.10 ; inelastic
(E) 0.8 ; elastic

Question

When the price of canned pickle juice increased $50 \%$, the quantity supplied of pickle juice increased $40 \%$.

What is the price elasticity of supply, and how is that value interpreted?

Choose 1 answer:
(A) 0.10 ; unit elastic
(B) 1.25 ; elastic
(C) 0.8 ; inelastic
(D) 0.10 ; inelastic
(E) 0.8 ; elastic

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 using the formula: $ PES = \frac{\% ext{ change in quantity supplied}}{\% ext{ change in price}} $ ‖ ‖ b ⋮ Calculation: Given that the price of canned pickle juice increased by 50% and the quantity supplied increased by 40%, we can substitute these values into the formula: $ PES = \frac{40\%}{50\%} = 0.8 $ ‖ ‖ c ⋮ Interpretation: A PES value of 0.8 indicates that the supply of canned pickle juice is inelastic. This means that the quantity supplied is relatively unresponsive to price changes. ‖ ∻Answer∻ ⚹ (C) 0.8; inelastic ⚹ ∻Key Concept∻ ⚹ Price Elasticity of Supply (PES) ⚹ ∻Explanation∻ ⚹ The price elasticity of supply measures how much the quantity supplied of a good responds to changes in its price. In this case, a PES of 0.8 indicates inelastic supply, meaning the quantity supplied changes less than proportionally to the price change. ⚹◊What is the formula for calculating price elasticity of supply in Microeconomics?⍭ Generate me a similar question◊

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