How can supply be relatively elastic?
1 Answer
Aug 9, 2015
Supply becomes relatively elastic, when the percentage change in quantity supplier is greater than the percentage change in price.
Explanation:
Let us assume -
When price goes up from $.4 to $.5 the quantity supplied moves up from 100 units to 150 units.
The percentage change in price is
The percentage change in quantity supplied is
Elasticity of supply =
Supply is relatively elastic because -
1 Elasticity of supply = 2 > 1
2 The percentage change in quantity supplied is greater than the percentage change in price. (50% > 25%)