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Multiple choice Economics question

I need some help with this question on PES. I know the answer is B after looking at the mark scheme but I don't get it. All help appreciated.

A good has a price elasticity of supply of +0.8. At present, the quantity supplied of the good is 200 units per week at a market price of £800 per unit. If the price rises to £1000 per unit then the quantity supplied per week would...

A increase to 250 units.
B increase to 240 units.
C increase to 360 units.
D decrease to 160 units
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Anonymous #1
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Any help?
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Davedude
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Not in economics, but shouldn’t it be C, as 200 x 1.8 = 360
Original post by Davedude
Not in economics, but shouldn’t it be C, as 200 x 1.8 = 360


I thought the same thing! According to the mark shceme, it says the answer is B 240?
Elasticities are concerned with proportional change.

PES= % change Qs / % change P

Therefore % change Qs = PES x % change P

Price increased from 800 to 1000 which is a percentage increase of 25% or 0.25.

0.8 x 0.25 = 0.2

Therefore proportional change in Q is 0.2.

200 x 0.2 = 40

200+40=240
(edited 6 years ago)
Original post by BasicMistake
Elasticities are concerned with proportional change.

PES= % change Qs / % change P

Therefore % change Qs = PES x % change P

Price increased from 800 to 1000 which is a percentage increase of 25% or 0.25.

0.8 x 0.25 = 0.2

Therefore proportional change in Q is 0.2.

200 x 0.2 = 40

200+40=240


Thanks that really helped! :smile:
PES = %change in supply / %change in price

0.8 = %change in supply / (1000-800 x 100)

0.8 = %change in supply / 25

0.8 x 25 = % change in supply = 20

200 units = 100%

X units = 100% + 20% (increase by 20%)

X units = 200 / 100 x 120

X units = 240
(edited 6 years ago)

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