Price Elasticity of Supply Using Percentage Changes

Steps:

• Find initial supply at P=$1: S=10×1=10 units.
• Find new supply at P=$2: S=10×2=20 units.
• Calculate % change in supply: ((20-10)/10)×100%=100%.
• Calculate price elasticity: 100% / ((2-1)/1 ×100%)=100%/100%=1.0.

Why C is correct:

• For supply S=10P, quantity doubles when price doubles, so % changes are equal, yielding unit elasticity by definition.

Why the others are wrong:

• A. 0 implies no quantity response to price (perfectly inelastic).
• B. 0.5 implies smaller quantity response than price change (inelastic).
• D. 2.0 implies larger quantity response than price change (elastic).

Final answer: C