Price Elasticity of Supply Measures Responsiveness to Price Changes

Steps:

• Recall the definition: Price elasticity of supply (PES) quantifies how quantity supplied responds to price changes.
• Use the formula: PES = (% change in quantity supplied) / (% change in price).
• Eliminate options unrelated to price as the independent variable.
• Select the option matching the direct relationship between price and supply.

Why C is correct:

• PES is defined as the percentage change in quantity supplied divided by the percentage change in price, directly measuring supply's responsiveness to price.

Why the others are wrong:

• A: Reverses the relationship; elasticity focuses on supply's response to price, not vice versa.
• B: Involves demand, not supply elasticity; confuses with cross-elasticity concepts.
• D: Describes cross-price elasticity of supply for substitutes, not general price elasticity.

Final answer: C