Answer:
Option (D) is correct.
Explanation:
Initial price = $7
Initial quantity supplied = 4,500
New price = $9
New quantity supplied = 5,500
Percentage change in Quantity supplied:
= (Change in quantity supplied ÷ Initial quantity supplied) × 100
= [(5,500 - 4,500) ÷ 4,500] × 100
= (1,000 ÷ 4,500) × 100
= 0.22 × 100
= 22%
Percentage change in price:
= (Change in price ÷ Initial price) × 100
= [($9 - $7) ÷ $7] × 100
= ($2 ÷ $7) × 100
= 0.2857 × 100
= 28.57%
Therefore, the price elasticity of supply is as follows:
= Percentage change in quantity supplied ÷ Percentage change in price
= 22 ÷ 28.57
= 0.77
Hence, the price elasticity of supply of oranges is inelastic, since it is less than 1.
