A seller increased the quantity he offered for sale from 200 units to 250 units when the price of his product increased by 12.5%. What is the price elasticity of the supply of his product?
-
2.00
- 1.50
- 1.00
- 0.50
The correct answer is: A
Explanation
The price elasticity of supply = % change in quantity supplied / % change in price
% change in quantity supplied = 250 - 200 = 50
\(\frac{50}{200}\) x 100 = 25
Therefore, price elasticity of supply = \(\frac{25}{12.5}\) = 2