If the price of a commodity increases by 50% and its supply increases by 25%

Economic Applications (10)

If the price of a commodity increases by 50% and its supply increases by 25% then calculate the price elasticity of supply following the percentage method. Identify the degree of price elasticity.

Answer

E2 = Percentage change in quantity supplied / Percentage change in price

= 25%/50%

= 0.5

Less than elastic: Ep < 1