Answer :
The correct expression of the price elasticity of supply is
e1 = ΔQs / ΔP * (P / Qs), where:
- e1 represents the price elasticity of supply
- ΔQs represents the change in quantity supplied
- ΔP represents the change in price
- P represents the initial price
- Qs represents the initial quantity supplied
This formula measures the responsiveness of the quantity supplied to a change in price. A value of e1 greater than 1 indicates elastic supply, meaning that a change in price leads to a relatively larger change in quantity supplied.
Conversely, a value of e1 less than 1 indicates inelastic supply, where a change in price results in a relatively smaller change in quantity supplied.
A value of e1 equal to 1 represents unitary elasticity, where the percentage change in quantity supplied is the same as the percentage change in price.
To learn more about elastic supply
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