Question

The price elasticity of supply is 0.8​, and price increases by 0.5percent. As a​ result, the quantity supplied will increase by ................ percent.  

​(Enter your response as a real number rounded to one decimal​ place, and do not use a percentage​ sign.)

Answer 1

As price elasticity of supply is equal to percentage change in quantity supplied divided by the percentage change in price. Therefore, the quantity supplied will increase by 0.8×0.5% which is equal to 0.4%. Remember, elasticity of supply measures the responsiveness of change in quantity supplied due to a change in price.