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If a 20% fall in price brings about a 10% fall in quantity supplied, in such a case elasticity of supply will be equal to:
- a)2.0
- b)0.5
- c)1.0
- d)1.5
Correct answer is option 'B'. Can you explain this answer?
Verified Answer
If a 20% fall in price brings about a 10% fall in quantity supplied, i...
Correct answer is option B.
Explanation:
The elasticity of supply is a measure of how the quantity supplied of a good responds to a change in its price. It is calculated using the following formula:
Elasticity of Supply = (% Change in Quantity Supplied) / (% Change in Price)
In this case, we are given:
- A 20% fall in price (which is a -20% change in price)
- A 10% fall in quantity supplied (which is a -10% change in quantity supplied)
Now, we can plug these values into the formula:
Elasticity of Supply = (-10%) / (-20%)
Elasticity of Supply = 0.5
So, the elasticity of supply in this case is 0.5. This means that for every 1% decrease in price, the quantity supplied will decrease by 0.5%. This indicates that the supply is inelastic, as the percentage change in quantity supplied is less than the percentage change in price.
Elasticity of Supply = (% Change in Quantity Supplied) / (% Change in Price)
In this case, we are given:
- A 20% fall in price (which is a -20% change in price)
- A 10% fall in quantity supplied (which is a -10% change in quantity supplied)
Now, we can plug these values into the formula:
Elasticity of Supply = (-10%) / (-20%)
Elasticity of Supply = 0.5
So, the elasticity of supply in this case is 0.5. This means that for every 1% decrease in price, the quantity supplied will decrease by 0.5%. This indicates that the supply is inelastic, as the percentage change in quantity supplied is less than the percentage change in price.
Most Upvoted Answer
If a 20% fall in price brings about a 10% fall in quantity supplied, i...
Elasticity of supply = % change in quantity supplied /
% change in price
-> 10/20 = 0.5
% change in price
-> 10/20 = 0.5
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If a 20% fall in price brings about a 10% fall in quantity supplied, i...
**Explanation:**
The elasticity of supply measures the responsiveness of the quantity supplied to a change in price. It is calculated as the percentage change in quantity supplied divided by the percentage change in price.
Given:
- Percentage change in price = -20%
- Percentage change in quantity supplied = -10%
To calculate the elasticity of supply, we use the formula:
Elasticity of supply = (Percentage change in quantity supplied) / (Percentage change in price)
Substituting the given values:
Elasticity of supply = (-10%) / (-20%)
Simplifying the expression:
Elasticity of supply = 0.10 / 0.20
Elasticity of supply = 0.5
Therefore, in this case, the elasticity of supply is 0.5 or 0.5 units.
**Interpretation:**
The elasticity of supply value of 0.5 indicates that quantity supplied is inelastic with respect to price. This means that a 1% change in price will result in a smaller than 1% change in quantity supplied. In other words, the quantity supplied is not very responsive to changes in price.
In this scenario, a 20% fall in price leads to a 10% fall in quantity supplied, which means that the quantity supplied is not very sensitive to changes in price. The elasticity of supply being less than 1 indicates that the supply is relatively inelastic, and producers are not willing or able to adjust their quantity supplied significantly in response to changes in price.
Hence, the correct answer is option B) 0.5.
The elasticity of supply measures the responsiveness of the quantity supplied to a change in price. It is calculated as the percentage change in quantity supplied divided by the percentage change in price.
Given:
- Percentage change in price = -20%
- Percentage change in quantity supplied = -10%
To calculate the elasticity of supply, we use the formula:
Elasticity of supply = (Percentage change in quantity supplied) / (Percentage change in price)
Substituting the given values:
Elasticity of supply = (-10%) / (-20%)
Simplifying the expression:
Elasticity of supply = 0.10 / 0.20
Elasticity of supply = 0.5
Therefore, in this case, the elasticity of supply is 0.5 or 0.5 units.
**Interpretation:**
The elasticity of supply value of 0.5 indicates that quantity supplied is inelastic with respect to price. This means that a 1% change in price will result in a smaller than 1% change in quantity supplied. In other words, the quantity supplied is not very responsive to changes in price.
In this scenario, a 20% fall in price leads to a 10% fall in quantity supplied, which means that the quantity supplied is not very sensitive to changes in price. The elasticity of supply being less than 1 indicates that the supply is relatively inelastic, and producers are not willing or able to adjust their quantity supplied significantly in response to changes in price.
Hence, the correct answer is option B) 0.5.
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If a 20% fall in price brings about a 10% fall in quantity supplied, in such a case elasticity of supply will be equal to:a)2.0b)0.5c)1.0d)1.5Correct answer is option 'B'. Can you explain this answer?
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