Price Elasticity of Supply Formula

Steps:

• Calculate percentage change in quantity supplied: (207 - 200) / 200 × 100% = 3.5%.
• Calculate percentage change in price: (110 - 100) / 100 × 100% = 10%.
• Divide percentage change in quantity by percentage change in price: 3.5% / 10% = 0.35.
• Compare to options; 0.35 is closest to 0.4.

Why B is correct:

• The standard formula for price elasticity of supply, %ΔQs / %ΔP, yields 0.35, closest to 0.4 among the choices.

Why the others are wrong:

• A. 0.2 underestimates the response, as if ΔQs were only 4 units.
• C. 2.5 approximates the reciprocal (10% / 3.5% ≈ 2.86) but reverses the formula.
• D. 5.0 overestimates greatly, as if %ΔQs were 50%.

Final answer: B