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Question
What does the price elasticity of supply mean? How do we measure it?
Solution
Price elasticity of supply (es) is defined as the degree of the responsiveness of quantity supplied, to the change in the price of a good.
It is expressed as:-
`e_s="Percentage change in quality supplied"/"Percentage change in price"`
`=((DeltaQ)/Qxx100)/((DeltaP)/Pxx100)`
`=(DeltaQ)/QxxP/(DeltaP)`
`=(DeltaQ)/(DeltaP)xxP/Q`
Where
ΔQ = change in quantity supplied
ΔP = change in price
P = initial price
Q = initial supply
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