A 40% increase in price led the quantity supplied of bicycles in a competitive market to increase from 300

Economics Dec 13, 2020

A 40% increase in price led the quantity supplied of bicycles in a competitive market to increase from 300.00 to 330.00. What is the price elasticity of supply for bicycles?

Expert Solution

The price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price. The percentage change in quantity supplied is:

(330 - 300) / 300 = 10%

Thus the price elasticity of supplied is:

10% / 40% = 0.25

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