An increase in the price of a commodity from $10 to $ 15 leads to an increase in the quantity supplied from 10 units to 15 units. The price elasticity of su...

An increase in the price of a commodity from $10 to $ 15 leads to an increase in the quantity supplied from 10 units to 15 units. The price elasticity of supply is

Answer Details

The price elasticity of supply (PES) measures the responsiveness of the quantity supplied of a good or service to a change in its price. In this case, the price of the commodity increased from $10 to $15, and the quantity supplied increased from 10 units to 15 units. PES is calculated as the percentage change in the quantity supplied divided by the percentage change in the price. Using the given values, we can calculate the percentage changes in quantity and price as follows: Percentage change in quantity supplied = (15 - 10) / 10 x 100% = 50% Percentage change in price = (15 - 10) / 10 x 100% = 50% Therefore, PES = 50% / 50% = 1 So, the price elasticity of supply is 1, which means that the percentage change in quantity supplied is equal to the percentage change in price. A PES of 1 indicates that the supply of the commodity is perfectly elastic, meaning that producers can increase their output by any amount without affecting the price.