Using the supply schedule table (price $1 → quantity 3, price $2 → quantity 5, price $3 → quantity 7), what is the price elasticity of supply when price increases from $1 to $3? A) 0.5 B) 0.66 C) 1.5 D) 2.0

The table shows the supply schedule for a good. Table: price ($) | quantity (000) 1 | 3 2 | 5 3 | 7

The table shows the supply schedule for a good.

Table:
price ($) | quantity (000)
1 | 3
2 | 5
3 | 7

Using the supply schedule table (price $1 → quantity 3, price $2 → quantity 5, price $3 → quantity 7...

Answer

The price elasticity of supply from $P=$1 to $P=$3 is approximately $0.66$ (Option B). Using the percentage-change method from the initial point, $\text{PES}=\frac{\Delta Q/Q_1}{\Delta P/P_1}=\frac{(7-3)/3}{(3-1)/1}=\frac{4/3}{2}=\frac{2}{3}\approx0.66$.

Explanation

What you are being asked to find

You need the price elasticity of supply (PES) for the move from $P=1$ to $P=3$ using the quantities from the supply schedule.

Pull the two points from the table

Initial point: $P_1=1$, $Q_1=3$ (thousand units)
New point: $P_2=3$, $Q_2=7$ (thousand units)

Compute the changes

$$\Delta Q = Q_2 - Q_1 = 7-3 = 4$$ $$\Delta P = P_2 - P_1 = 3-1 = 2$$

Apply the elasticity formula (using the initial value method)

Price elasticity of supply: $$\text{PES}=\frac{\%\Delta Q}{\%\Delta P}$$ Using initial values for the percent changes: $$\%\Delta Q = \frac{\Delta Q}{Q_1}=\frac{4}{3}$$ $$\%\Delta P = \frac{\Delta P}{P_1}=\frac{2}{1}=2$$ So, $$\text{PES}=\frac{4/3}{2}=\frac{4}{6}=\frac{2}{3}\approx0.66$$

Matching to the choices

$0.66$ corresponds to B).