Multiple choice

If the price of apples rises from Rs. 30 per kg to Rs. 40 per kg and the supply increases from 240 kg to Rs. 300 kg, then the elasticity of supply is

  1. .77

  2. .67

  3. (-) .67

  4. (-) .77
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A Correct answer
Explanation

Elasticity of supply = (% change in quantity supplied) / (% change in price). % change in price = (40-30)/30 x 100 = 33.33%. % change in supply = (300-240)/240 x 100 = 25%. Elasticity = 25/33.33 = 0.75, approximately 0.77.

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