Question

If the price elasticity of supply is 0.8, and price increased by 5%, quantity supplied would Group of answer choices increase by 4%. increase by 6.25%. decrease by 4%. decrease by 6.25%.

Answer 1

If the price elasticity of supply is 0.8, and price increased by 5%, quantity supplied would increase by 4%.

What is price elasticity of supply?

Price elasticity of supply is defined as the ratio of the percentage change in quantity supplied of a commodity to the percentage change in price.

It means that the responsive change in the quantity supplied in relation to the price of the commodity.

The formula of Price elasticity of supply is:

$\text{Price Elasticity of Supply}=\dfrac{\text{\%Change in quantity Supplied}}{\text{\%change in price}}$

Now, according to the given information,

Price Elasticity of Supply = 0.8, and

Price increased = 4%

Now, by applying the values in the above formula to get the Price Elasticity of Supply:

$\text{Price Elasticity of Supply}=\dfrac{\text{\%Change in quantity Supplied}}{\text{\%change in price}}\\\\\%\text{Change in quantity Supplied}= 0.8 \times 5\\\\\%\text{Change in quantity Supplied}=4\%$

Therefore, option A is correct.

To learn more about the elasticity, refer to:

https://brainly.com/question/14450755

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