A 4% rise in price leads to an 8% rise in quantity supplied. The elasticity of supply is 2.0, which statement is true?

• A. Inelastic.
• B. Elastic.
• C. Unit elastic.
• D. Perfectly inelastic.

Answer: (B)

Elasticity of supply measures how much the quantity supplied responds to a price change. It’s calculated as the percentage change in quantity supplied divided by the percentage change in price. Here, a 4% rise in price leads to an 8% rise in quantity supplied, so elasticity = 8% / 4% = 2.0. An elasticity above 1 means the supply is elastic, meaning producers respond more than proportionally to price changes. So the 4% price increase causing an 8% quantity increase shows a strong, responsive supply. The other cases describe less or no responsiveness (inelastic, perfectly inelastic) or exactly proportional responsiveness (unit elastic), which doesn’t fit since the elasticity is 2.