question archive The price elasticity of supply of a basic commodity that a nation imports from producers in other countries is 2
The price elasticity of supply of a basic commodity that a nation imports from producers in other countries is 2
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The price elasticity of supply of a basic commodity that a nation imports from producers in other countries is 2. What would you expect to happen to the volume of imports if the price of this commodity rises by 10%?
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Answer: Increase by 20%
If price elasticity of supply is 2, then for a 1% increase in price, quantity supplied increases by 2%. Thus, a 10% increase in price will result in a 20% increase in quantity supplied from abroad. Therefrom, imports imports of this commodity will rise by 20%.
