Question

Based on the supply schedule above, which of the following is true of the product's price elasticity of supply?

Answer 1

The product's price elasticity of supply is 0.75 when increasing from $3 to $4, indicating a relatively inelastic response in quantity supplied to changes in price within that range. (option E)

The following formula can be used to get the price elasticity of supply (PES):

`\[ \text{PES} = \frac{\%\text{ change in quantity supplied}}{\%\text{ change in price}} \]`

Let's calculate the percentage change in quantity supplied for each interval:

1. From $1 to $2:

`\[ \%\text{ change in quantity supplied} = ((6 - 4))/(4) * 100\% = 50\% \]`

2. From $2 to $3:

`\[ \%\text{ change in quantity supplied} = ((8 - 6))/(6) * 100\% = 33.33\% \]`

3. From $3 to $4:

`\[ \%\text{ change in quantity supplied} = ((10 - 8))/(8) * 100\% = 25\% \]`

Now, let's analyze the provided options:

- The available data does not support Option A.

- Option B is not necessary as we can calculate the PES.

- Option C is incorrect; the PES is not -0.6.

- Option D is incorrect; the PES is not 1.5.

- Option E is correct; the PES is
`\( (25\%)/(33.33\%) \)` when increasing from $3 to $4, which is approximately 0.75.

Therefore, the correct answer is E. It is 0.75 when increasing from $3 to $4.