The price of lemons increased $10 \%$.
How much did the quantity of lemons increase if the price elasticity of supply of lemons is 2 , and how is that elasticity interpreted?

Choose 1 answer:
(A) $20 \%$; elastic
(B) $2 \%$; elastic
(C) $0.5 \%$; inelastic
(D) $2 \%$ inelastic
(E) $200 \% ;$ inelastic

Question

The price of lemons increased $10 \%$.
How much did the quantity of lemons increase if the price elasticity of supply of lemons is 2 , and how is that elasticity interpreted?

Choose 1 answer:
(A) $20 \%$; elastic
(B) $2 \%$; elastic
(C) $0.5 \%$; inelastic
(D) $2 \%$ inelastic
(E) $200 \% ;$ inelastic

Accepted Answer

∻Solution∻ ‖ a ⋮ Price Elasticity of Supply Formula: The price elasticity of supply (PES) is calculated using the formula $PES = \frac{\% ext{ change in quantity supplied}}{\% ext{ change in price}}$. ‖ ‖ b ⋮ Calculation: Given that the price elasticity of supply for lemons is 2 and the price of lemons increased by 10%, we can rearrange the formula to solve for the percentage change in quantity supplied: $\% ext{ change in quantity supplied} = PES imes \% ext{ change in price} = 2 imes 10\% = 20\%$. ‖ ‖ c ⋮ Interpretation of Elasticity: A price elasticity of supply greater than 1 indicates that the supply is elastic, meaning the quantity supplied is responsive to price changes. ‖ ∻Answer∻ ⚹ A. 20%; elastic ⚹ ∻Key Concept∻ ⚹ Price Elasticity of Supply ⚹ ∻Explanation∻ ⚹ The price elasticity of supply measures how much the quantity supplied responds to a change in price. An elasticity greater than 1 indicates an elastic supply, which is highly responsive to price changes. In this case, a 10% increase in price leads to a 20% increase in quantity supplied, indicating an elastic supply. ⚹◊What is the formula for calculating price elasticity of supply (PES) in economics?⍭ Generate me a similar question◊

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