An increase in price from 25 pence to 30 pence leads to an increase in the quantity supplied from 40 units to 44 units. The price elasticity of supply is ?
Correct answer: B. +0.5
- A. +2
- B. +0.5
- C. -2
- D. -0.5
Explanation
Price rises by 20% while quantity supplied rises by 10%, so price elasticity of supply is 10% ÷ 20% = +0.5. Supply elasticity is positive because price and quantity supplied move in the same direction.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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