Paper 2 · Elasticity of Demand and Supply
The price of electricity rises from 1,20 per kilowatt and the quantity supplied rises by 40 percent. The supply of electricity is therefore
Aprice inelastic, because quantity supplied changed less than proportionately to price
Bunitary elastic, because quantity supplied and price changed by the same percentage
Cperfectly inelastic, because quantity supplied did not respond to the price change
Dprice elastic, because quantity supplied changed more than proportionately to price
Explanation: A 20 percent rise in price brought a 40 percent rise in quantity supplied, so the elasticity is 2. Any value greater than 1 means supply is elastic: producers responded more than proportionately, which happens where there is spare capacity or stock that can be released quickly.
Derived from ZIMSEC Economics 4050/2 Paper 2, June 2023, Q1