Question

The price of a dozen eggs falls from $3 to $2.70. In response to this price change, the quantity supplied of eggs falls from 100,000 dozen eggs to 75,000 dozen eggs. What is the price elasticity of supply for eggs

Answer 1

The price elasticity of supply for eggs is 2.5.

What is the price elasticity of supply?

The price elasticity of supply measures the percentage change in the quantity supplied when the price of a good changes.

The price elasticity of supply = percentage change the quantity supplied / percentage change in price.

• percentage change the quantity supplied = (75,000 / 100,000) - 1 = -0.25 = 25%
• percentage change in price = (2.7 / 3) - 1 = -0.1 = -10%

The price elasticity of supply = 25 / 10 = 2.5

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