46. The price of a product increases by 12%, and this leads to a short-run increase in quantity supplied of 9%. What is the elasticity of supply for this product?
Answer: B
The elasticity of supply for this product is 0.75.
The elasticity of supply is calculated by dividing the percentage change in quantity supplied by the percentage change in price. In this case, a 12% price increase leads to a 9% increase in quantity supplied, resulting in an elasticity of supply of 0.75.
A) 1.33
This option is incorrect as it represents an elasticity greater than 1, which indicates a more than proportionate response in quantity supplied to a price increase. Given the data, the actual elasticity is 0.75, showing a less than proportionate response.
B) 0.75
This option is correct because it accurately reflects the elasticity of supply calculated by dividing the 9% increase in quantity supplied by the 12% increase in price. The result is 0.75, indicating that the quantity supplied is inelastic in response to price changes.
C) 3
This option is incorrect because an elasticity of 3 indicates a highly elastic supply, meaning a significant increase in quantity supplied for a small increase in price. The data provided shows a less responsive supply increase, resulting in a lower elasticity of 0.75.
D) 1.08
This option is incorrect as it indicates an elasticity slightly greater than 1, suggesting a more elastic supply than what is represented in the data. The calculated elasticity is 0.75, which indicates inelastic behavior rather than elasticity.
Conclusion
The correct elasticity of supply is 0.75, indicating a less than proportional increase in quantity supplied relative to the price increase. Other options either overstate or misrepresent the relationship between price and quantity supplied, failing to align with the actual calculated elasticity from the given data.