Most Elastic Supply Scenario Explained

For a price increase from $100 to $110, supply is the most elastic when quantity supplied:

does not change.

increases from 20 to 30.

increases from 20 to 22.

increases from 20 to 40.

To determine which scenario represents the most elastic supply in response to a price increase from $100 to $110, we need to consider the concept of price elasticity of supply, which measures how much the quantity supplied responds to a change in price.

The formula for price elasticity of supply (PES) is:

[ PES = \frac{%\text{ change in quantity supplied}}{%\text{ change in price}} ]

1. Price change: The price increases from $100 to $110, which is a change of $10. The percentage change in price is:

[ %\text{ change in price} = \frac{10}{100} \times 100 = 10% ]

Now, let's analyze each option for the percentage change in quantity supplied:

1. Does not change: Quantity supplied remains at 20.

   • Percentage change in quantity supplied = 0%
   • PES = 0% / 10% = 0 (perfectly inelastic)

2. Increases from 20 to 30:

   • Change in quantity supplied = 30 - 20 = 10
   • Percentage change in quantity supplied = (\frac{10}{20} \times 100 = 50%)
   • PES = 50% / 10% = 5 (elastic)

3. Increases from 20 to 22:

   • Change in quantity supplied = 22 - 20 = 2
   • Percentage change in quantity supplied = (\frac{2}{20} \times 100 = 10%)
   • PES = 10% / 10% = 1 (unit elastic)

4. Increases from 20 to 40:

   • Change in quantity supplied = 40 - 20 = 20
   • Percentage change in quantity supplied = (\frac{20}{20} \times 100 = 100%)
   • PES = 100% / 10% = 10 (very elastic)

Based on these calculations, the most elastic supply occurs when the quantity supplied increases from 20 to 40, resulting in a PES of 10.

Therefore, the answer is:

Increases from 20 to 40.