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13 October, 05:24

Suppose that in the market for ice cream the elasticity of supply is equal to 1.50. How would a 10% increase in the price of ice cream affect the quantity of ice cream supplied?

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  1. 13 October, 05:35
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    The quantity will decline by 15%.

    Step-by-step explanation:

    Elasticity of Demand = % Change in quantity / % Change in price

    ð 1.50 = % change in quantity / 10

    ð Percentage change in quantity = 15%

    Percentage change in quantity shows an inverse relation with respect to the percentage change in price. In this case of ice-cream, a 10% jump in the price will result the quantity to fall by 15%.
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