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Sagot :
The supply is elastic in nature.
Price elasticity expresses the percentage change in quantity required caused by a one percent increase in price while maintaining all other variables constant. If the elasticity is 2, a 1% increase in price results in a 2% decrease in amount demanded.
Price elasticity is computed with the help of formula given below:
Price elasticity of supply = % increase in quantity supplied / % increase in price
Price elasticity of supply = 20%/((.6-.5)/(.6+.5)/2)
Price elasticity of supply = 4.4
It is elastic in nature, because value of elasticity of supply is more than 1.
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