If a 5 percent increase in price leads to a 3 percent increase in quantity supplied, the elasticity of supply is

If a 5 percent increase in price leads to a 3 percent increase in quantity supplied, the elasticity of supply is

• A. 0.30
• B. 0.60
• C. 1.20
• D. 1.66

Answer: (B)

Elasticity of supply shows how much quantity supplied responds to a price change. It’s calculated as the percentage change in quantity supplied divided by the percentage change in price. Here, quantity supplied rises 3% when price rises 5%, so PES = 3% / 5% = 0.60. Since this elasticity is less than 1, the supply is inelastic in this range—the quantity supplied increases, but not as much as the price does.

Elasticity of supply shows how much quantity supplied responds to a price change. It’s calculated as the percentage change in quantity supplied divided by the percentage change in price. Here, quantity supplied rises 3% when price rises 5%, so PES = 3% / 5% = 0.60. Since this elasticity is less than 1, the supply is inelastic in this range—the quantity supplied increases, but not as much as the price does.