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

Question

3 years ago

11

emand for gasoline, the price of gasoline increases by 20 percent. As a result, the quantity supplied of gasoline will|?

1 answer:

netineya [11] · Answer 1 · 2022-02-28T11:05:44+03:00

Answer:

increase by 8 percent

Explanation:

<em>Price elasticity of supply of a product is the degree of responsiveness of supply of that product to a change in price.</em> Simply put:

Price Elasticity of supply = change in quantity supply/ change in price.

In this case, price elasticity of supply of gasoline = 0.4

Percentage price increase = 20 percent.

Hence,

0.4 = change in supply/20

Change in supply = 20 x 0.4 = 8 percent

<em>Therefore, the quantity supply of gasoline will increase by 8 percent</em>