question_answer

The price elasticity of supply of a good is 0.8. Its price rises by 50 percent. Calculate the percentage increase in its supply.

Answer:

\[{{e}_{s}}\] = 0.8

\[\Delta P\] = 50%

\[\Delta Q\]=?

\[{{e}_{s}}=\frac{\text{Percentage}\,\,\text{Change}\,\,\text{in}\,\,\text{Quantity}\,\,\text{Supplied}}{\text{Percentage}\,\,\text{Change}\,\,\text{in}\,\,\text{price}}\]

or,        0.8 = \[\frac{\Delta Q}{50}\]

or,        \[\Delta Q\]= 40%

Percentage Change in Quantity Supplied is 40%.