O Levels Economics (2281)•2281/11/M/J/21
Explanation
Price Elasticity of Supply Formula
Steps:
- % change in quantity supplied = (500 - 400) / 400 × 100% = 25%
- % change in price = (6 - 5) / 5 × 100% = 20%
- PES = 25% / 20% = 1.25
Why D is correct:
- PES equals 1.25 using the formula (%ΔQs / %ΔP), indicating elastic supply.
Why the others are wrong:
- A: 0.8 reverses the ratio (%ΔP / %ΔQs).
- B: 0.9 miscalculates one percentage (e.g., wrong base).
- C: 1.2 uses midpoint method incorrectly.
Final answer: D
Topic: Price elasticity of supply (PES)
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