Price elasticity of supply of a good is 2.By what percentage should it
| Price elasticity of supply of a good is 2.By what percentage should its price rise so that its supply rises by 40 percent?
A. 20
B. 10
C. 50
D. 80
Right Answer is: A
SOLUTION
• Price elasticity of supply = % change in quantity supplied/% change in price
• So, % change in price=% change in quantity supplied/ price elasticity of supply
• Here, Price elasticity of supply of a good = 2, % change in quantity supplied= 40%.
• So, % change in price=.4/2=.2= 20%
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Price elasticity of supply of a good is 2.By what percentage should it