Economics Elasticity Of Demand Questions Medium
The price elasticity of supply is calculated by dividing the percentage change in quantity supplied by the percentage change in price. The formula for price elasticity of supply is:
Price Elasticity of Supply = (% Change in Quantity Supplied) / (% Change in Price)
To calculate the percentage change in quantity supplied, you subtract the initial quantity supplied from the final quantity supplied, divide it by the initial quantity supplied, and then multiply by 100. Similarly, to calculate the percentage change in price, you subtract the initial price from the final price, divide it by the initial price, and then multiply by 100.
Once you have the percentage changes in quantity supplied and price, you can plug them into the formula to calculate the price elasticity of supply. The resulting value will indicate the responsiveness of quantity supplied to changes in price. If the price elasticity of supply is greater than 1, supply is considered elastic, meaning that a small change in price leads to a relatively larger change in quantity supplied. If the price elasticity of supply is less than 1, supply is considered inelastic, indicating that a change in price has a relatively smaller effect on quantity supplied.