Question

An economist doing an analysis on the market for original paintings finds that a 7% increase in price will lead to an increase in the quantity supplied by 10%. What is the price elasticity of supply?

Answer 1

Answer:

The price elasticity of supply is 1.42.

Explanation:

The price elasticity of supply is the measure of the degree of responsiveness of quantity supplied to a change in price. It is the ratio of proportionate change in quantity supplied and proportionate change in price.

An economist doing an analysis on the market for original paintings finds that a 7% increase in price will lead to an increase in the quantity supplied by 10%.

Price elasticity of supply

= $\frac{\% \Delta Qs}{\% \Delta P}$

= $\frac{10}{7}$

= 1.42