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A 20% increase in price led the quantity supplied of pencils in a competitive market to increase from 380.00 to 410.00. What is the price elasticity of supply for pencils?

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Answer:

about 0.39 (inelastic)

Explanation:

Elasticity of supply is the ratio of percentage supply change to a corresponding percentage of price change. Here, that is ...

eos = (410/380 -1)/(0.20) = 0.78947/0.2 ≈ 0.3947

Values below 1 are said to correspond to an inelastic supply, one not very sensitive to price.

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