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price elasticity of supply

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As price falls from $4 to $3, quantity supplied falls from 400 units to 350 units. Price elasticity of supply is:

A) 0.95
B) 1.20
C) 2.22
D) .50

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Solution Preview

Hi there,
<br>Calculating the Percentage Change in Quantity Supply
<br>The formula used to calculate the percentage change in quantity supplied is:
<br>[QSupply(NEW) - QSupply(OLD)] / QSupply(OLD)
<br>By filling in the values, we get:
<br>(350 - 400) / 400
<br>= 12.5%
<br>So we note that % Change in Quantity Supplied = 0.125 (This is in decimal terms. In percentage terms it would be 12.5%). Now we need to calculate the percentage change in price.
<br>Calculating the Percentage Change in ...