If the price elasticity of supply of a
good is +4.0 and its price increases by 10%, the increase in quantity supplied is

Question

BlackTom AI · Accepted Answer

Interpreting the given information, the price elasticity of supply (Es) is defined as the percentage change in quantity supplied divided by the percentage change in price: Es = %ΔQs / %ΔP.

Option A: 0.4% — This would imply a very tiny response of quantity supplied to a price change. To check, multiply the price change: Es = %ΔQs / 10%. If %ΔQs were 0.4%, Es would be 0.4% / 10% = 0.04, which is far from the given Es of 4.0. So this option misrepresents the relationship.

Option B: 40% — This aligns with the formula. With Es = 4.0 and %ΔP = 10%, we get %ΔQs = Es × %ΔP = 4.0 × 10% = 40%. This is the direct calculation that matches the elasticity concept.

Option C: 2.5% — If %ΔQs were 2.5%, Es would be 2.5% / 10% = 0.25, not 4.0. This option undervalues the sensitivity of quantity supplied to price changes.

Option D: 25% — Here, Es would be 25% / 10% = 2.5, which is still below the given elasticity of 4.0. It reflects a stronger response than option C but still not the correct multiple of the price change.

In summary, the key step is applying Es = %ΔQs / %ΔP and solving for %ΔQs: %ΔQs = Es × %ΔP = 4.0 × 10% = 40%. Among the provided choices, the number that matches this result is the one stating 40%, which corresponds to the second option in the list.

If the price elasticity of supply of a good is +4.0 and its price increases by 10%, the increase in quantity supplied is

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