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Elastic and Inelastic Demand

Study the dia...

Question

Study the diagram below, and answer the following questions.

What is the price elasticity of supply in the above diagram?

[1 mark]

A

Highly elastic

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B

Highly inelastic

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C

Unitary elastic

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D

Perfectly inelastic

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Solution

The correct option is C Unitary elastic
Change in quantity = 10
Change in price = 1
Percentage change in quantity = 100% (from 10 to 20) Percentage change in price = 100% (from 2 to 1)
Price elasticity of supply = Percentage change in quantity supplied/Percentage change in price
100/100 = 1

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