Question

If quantity supplied is decreases by 40%
due to a 60% decrease in price then elasticity of
supply is
a)(+)0.67
b)(-) 0.6
c)(+)1.5
d)(-)1.5​

Answer 1

Answer:

Just divide the percentage change in the dependent variable and the percentage change in the independent one. If the latter increases by 3% and the former by 1.5%, this means that elasticity is 0.5. ... Elasticity of -1 means that the two variables goes in opposite directions but in the same proportion.