Price Elasticity of Supply Equals 1 for Unit Elastic Response

Steps:

• Compute percentage change in price: ((8 - 10) / 10) × 100% = -20%.
• For each firm, compute percentage change in quantity supplied from initial 500 units: %ΔQ = ((Q at $8 - 500) / 500) × 100%.
• Calculate PES = |%ΔQ / %ΔP| for each firm.
• Identify firm where PES = 1 (percentage changes equal in magnitude).

Why C is correct:

• Firm C's quantity falls from 500 to 400, so %ΔQ = -20%, matching %ΔP magnitude; by definition, PES = 1 for unit elastic supply.

Why the others are wrong:

• A: %ΔQ = -40%, PES = 2 (elastic supply).
• B: %ΔQ = -30%, PES = 1.5 (elastic supply).
• D: %ΔQ = -10%, PES = 0.5 (inelastic supply).

Final answer: C