Question

If price elasticity of supply is 0.3 and price increases by 1 percent, quantity supplied will ____ by _____.

Answer 1

With a price elasticity of supply of 0.3, a 1 percent increase in price results in a 0.3 percent increase in the quantity supplied.

Step-by-step explanation:

When considering the price elasticity of supply, a measure of how the quantity supplied of a good responds to a change in price, one can determine the expected changes in supply when there is a change in price. In this case, we have a price elasticity of supply of 0.3. This implies that if the price increases by 1 percent, the quantity supplied will increase by 0.3 percent.

To calculate this change, we use the formula:
Percentage change in quantity supplied = (Elasticity of Supply) × (Percentage change in Price)

In this example, the calculation would be:
0.3 (elasticity of supply) × 1% (price increase)= 0.3% increase in quantity supplied.