Question

3. b. Calculate the elasticity of supply if a 15 %increase in the price of soya bean oil increases its supply from 300 to 345 units (5 Marks) 

Answer 1

$$E_s=\dfrac{\%\Delta Q}{\%\Delta P}=\dfrac{\dfrac{Q_2-Q_1}{0.5(Q_2+Q_1)}}{\%\Delta P},$$ $$E_s=\dfrac{\%\Delta Q}{\%\Delta P}=\dfrac{\dfrac{345-300}{0.5(345+300)}}{0.15}=0.93$$