Price Elasticity of Supply Formula

Steps:

• Percentage change in price = ($12 -$10)/$10 × 100% = 20%.
• Percentage change in quantity supplied = elasticity × percentage change in price = 0.5 × 20% = 10%.
• New output = original output × (1 + 10%) = 100 × 1.10 = 110 units.

Why B is correct:

• It directly results from applying the price elasticity of supply formula, Es = (%ΔQ)/(%ΔP), which measures responsiveness of quantity supplied to price changes.

Why the others are wrong:

• A: Implies a quantity decrease, but supply elasticity predicts an increase with rising price.
• C: Assumes 25% quantity increase, which would require elasticity of 1.25, not 0.5.
• D: Assumes 50% quantity increase, which would require elasticity of 2.5, not 0.5.

Final answer: B