Question

If a 7 percent increase in the price of a commodity results in a 12 percent increase in the quantity supplied, supply is said to be

Group of answer choices

perfectly elastic.

elastic.

unit elastic.

inelastic.

perfectly inelastic.

Answer 1

The elasticity of supply measures the percentage change in quantity supplied due to a percentage change in price.

Here, an increase in quantity supplied is given as 12% and an increase in price is given as 7%. So, the elasticity of supply equals:

So, supply is said to be elastic because a given change in price leads to a larger change in quantity supplied.