Question

The price elasticity of supply for umbrellas is 2. Suppose you're told that following a price increase, quantity supplied increased by 30 percent. What was the percentage change in price that brought this about

Answer 1

Answer:

15%

Explanation:

The formula and the calculation of the price elasticity of supply are presented below:

Price elasticity of supply = (Percentage change in quantity supplied ÷ percentage change in price)

where,

Price elasticity of supply = 2

And, the percentage change in quantity supplied is 30%

So, the percentage change in price is

= 30% ÷ 2

= 15%