Price Elasticity of Supply Formula

Steps:

• Calculate % change in quantity supplied: (500 - 400) / 400 × 100% = 25%.
• Calculate % change in price: (6 - 5) / 5 × 100% = 20%.
• Divide % change in quantity by % change in price: 25% / 20% = 1.25.

Why D is correct:

• Matches the PES formula using initial values, where PES = (%ΔQS) / (%ΔP) = 1.25.

Why the others are wrong:

• A: Inverse calculation (20%/25% = 0.8).
• B: Incorrect ratio, possibly misapplying midpoint method.
• C: Wrong division, like (100/5)/20% or similar error.

Final answer: D