CLEP Microeconomics Exam Prep

Answer - C - The correct equation for determining the elasticity of supply is to divide the percentage change in the quantity supplied by the percentage change in price.

Key Takeaway: The elasticity of supply is simply the measure of the responsiveness between the quantity that is being supplied and price changes in the market. Because higher prices lead to an increase in supply (remember that the supply curve slopes upward), elasticity of supply should always be positive. To determine the elasticity of supply, simply divide the percentage change in the quantity supplied by the percentage change in price.