Answer to Question #275581 in Microeconomics for Vghh

Question

Price elasticity of supply by point elasticity method when energy sector is in equilibrium

Answer 1

Elastic supply curves show that the quantity supplied reacts to price changes in a way that is not proportionate. The percentage change in quantity supplied divided by the percentage change in price is the price elasticity of supply. The elasticity of elastic supply is greater than one, indicating a high responsiveness to price fluctuations. The percentage change in quantity supplied is computed by dividing the change in quantity supplied by the initial quantity, and the percentage change in price is computed by dividing the change in price by the starting price in the point elasticity approach.