Price Elasticity of Supply Using Point Elasticity Formula

Steps:

• Calculate initial supply at P=$1: S=10+10(1)=20.
• Calculate point elasticity of supply: PES = (dS/dP) × (P/S), where dS/dP=10 (slope).
• Substitute values: PES=10 × (1/20)=0.5.
• This measures responsiveness at the initial price point.

Why A is correct:

• Matches the point elasticity formula for linear supply, PES=(slope)×(P/Q)=10×(1/20)=0.5.

Why the others are wrong:

• B: Assumes unit elasticity, ignoring the formula's initial quantity adjustment.
• C: Overstates by using final quantity (10×2/30≈0.67, not 2.0).
• D: Misapplies as percentage change without dividing by initial supply (10/2=5, but incorrect method).

Final answer: A