If the price elasticity of supply is 0.8, and price increased by 5%, quantity supplied would

a. Decrease by 6.25%

b. Decrease by 4%

c. Increase by 6.25%

d. Increase by 4%

If the price elasticity of supply is 0.8, and price increased by 5%, quantity supplied would d. Increase by 4%.

The formula is:

We are given:

• The price elasticity of supply = 0.8
• Percentage change in price = 5%
• Percentage change in quantity =?

Hence:

Percentage change in quantity = 0.8 * 5% = 4%