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lawyer [7]
3 years ago
13

Suppose the price elasticity of supply for gasoline in the short run is estimated to be 0.4. Due to an unexpected surge in the d

emand for gasoline, the price of gasoline increases by 20 percent. As a result, the quantity supplied of gasoline will:________.
Business
1 answer:
oee [108]3 years ago
6 0

Answer:

8%

Explanation:

The formula and the computation of the price elasticity of supply is shown below:

Price elasticity of supply = (Percentage change in quantity supplied ÷ percentage change in price)

where,

Price elasticity of supply = 0.4

And, the percentage change in price = 20%

So, the percentage change in quantity supplied is

= Price elasticity of supply × the percentage change in price

= 0.4 × 20%

= 8%

It shows a direct relationship between the quantity supplied and the price.

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