If the price increases by 1% and quantity supplied increases by 2%, the elasticity of supply is 2.0, indicating supply is

If the price increases by 1% and quantity supplied increases by 2%, the elasticity of supply is 2.0, indicating supply is

• A. Inelastic.
• B. Elastic.
• C. Unit elastic.
• D. Perfectly elastic.

Answer: (B)

Elasticity of supply measures how responsive the quantity supplied is to a change in price. Here, a 1% price increase leads to a 2% rise in quantity supplied, so the elasticity of supply is 2.0 (2% / 1% = 2). Since this value is greater than 1, supply is elastic, meaning producers respond more than proportionally to price changes. This contrasts with inelastic supply (elasticity less than 1), unit elastic (exactly 1), and perfectly elastic (very large or infinite responsiveness).

Elasticity of supply measures how responsive the quantity supplied is to a change in price. Here, a 1% price increase leads to a 2% rise in quantity supplied, so the elasticity of supply is 2.0 (2% / 1% = 2). Since this value is greater than 1, supply is elastic, meaning producers respond more than proportionally to price changes. This contrasts with inelastic supply (elasticity less than 1), unit elastic (exactly 1), and perfectly elastic (very large or infinite responsiveness).