Question

"The price elasticity of supply for umbrellas is 2. Suppose you're told that following a price increase, quantity supplied increased by 30 percent. What was the percentage change in price that brought this about?"

Answer 1

15%

Step-by-step explanation:

Price elasticity of supply is the responsiveness of proportionate change in quantity supplied due to proportionate change in price.

It is given by the following formula:

Price elasticity of suppl = % change in quantity supplied / % change in price

2 = 30% / % change in price

% change in price = 30% / 2

= 15%

Price increased by 15% that induced an increase in quantity supplied by 30%.