question archive If the elasticity of supply of crude oil is 1
Subject:EconomicsPrice:2.88 Bought3
If the elasticity of supply of crude oil is 1.5, how much will production have to increase to match a 10% price increase?
Here, in the market of crude oil, the elasticity of supply can be estimated as:
Es = The percentage change in the quantity supplied / The percentage change in the price level
1.5 = The percentage change in the quantity supplied / 10
That is, the percentage change in the quantity supplied is 15.
Henceforth, it can be inferred that the production of oil must rise by 15% when the price of oil rises by 10%.