Which statement correctly describes the formula for price elasticity of supply?

Which statement correctly describes the formula for price elasticity of supply?

• A. Percent change in quantity supplied divided by percent change in price
• B. Percent change in price divided by percent change in quantity supplied
• C. Percent change in quantity demanded divided by percent change in price
• D. Percent change in price divided by percent change in quantity demanded

Answer: (A)

Elasticity of supply shows how producers respond to price changes. It is defined as the percentage change in quantity supplied divided by the percentage change in price. This ratio captures how much more or less is offered for sale when the price moves. For example, if the price rises by 10% and quantity supplied rises by 20%, the elasticity of supply is 2, indicating a highly responsive supply. The other ideas don’t fit because reversing the ratio would describe how price changes in response to quantity supplied, not how supply responds to price. Using quantity demanded would be about elasticity of demand, not supply. And using price change divided by quantity demanded doesn’t reflect the standard measure of supply’s responsiveness.

Elasticity of supply shows how producers respond to price changes. It is defined as the percentage change in quantity supplied divided by the percentage change in price. This ratio captures how much more or less is offered for sale when the price moves. For example, if the price rises by 10% and quantity supplied rises by 20%, the elasticity of supply is 2, indicating a highly responsive supply.

The other ideas don’t fit because reversing the ratio would describe how price changes in response to quantity supplied, not how supply responds to price. Using quantity demanded would be about elasticity of demand, not supply. And using price change divided by quantity demanded doesn’t reflect the standard measure of supply’s responsiveness.