O Levels Economics (2281)•2281/12/M/J/24
Explanation
Price Elasticity of Supply Formula Application
Steps:
- Percentage change in quantity supplied: (500 kg - 400 kg) / 400 kg × 100% = 25%.
- Percentage change in price: (5) / $5 × 100% = 20%.
- Price elasticity of supply = 25% / 20% = 1.25.
Why D is correct:
- Price elasticity of supply measures responsiveness as the ratio of percentage change in quantity supplied to percentage change in price, directly yielding 1.25.
Why the others are wrong:
- A: 0.8 results from inverting the ratio (20%/25%).
- B: 0.9 arises from approximate division error (e.g., 100/110).
- C: 1.2 uses midpoint method incorrectly for price change.
Final answer: D
Topic: Price elasticity of supply (PES)
Practice more O Levels Economics (2281) questions on mMCQ.me