Answer:
Elasticity of supply=3.3>1, there for the supply is elastic
Explanation:
Elasticity of supply can be defined as a ratio that can be used to test the sensitivity of supply due to a change in price.
The formula can be expressed as;
Elasticity of supply=Percentage change in quantity supplied/Percentage change in price
where;
Percentage change in quantity supplied=((Final quantity supplied-Initial quantity supply)/(Initial quantity supplied))×100
Final quantity supplied=1,300 boxes
Initial quantity supplied=1,000 boxes
Percentage change in quantity supplied=(1,300-1,000)/1,000=300/1,000
Percentage change in quantity supplied=(0.3×100)=30%
Percentage change in price=((Final price-Initial price)/(Initial price))×100
Final price=$24
Initial price=$22
Percentage change in price=(24-22)/22=2/22
Percentage change in price=(1/11)×100=9.1%
With all the values calculated, the elasticity of supply can be calculated as follows;
Elasticity of supply=30%/9.1%=3.3
Elasticity of supply=3.3>1, there for the supply is elastic
