If the price elasticity of supply for lumber is 2.4, and the price of lumber increases by 20%, then in such case, the quantity supplied of the lumber would be changed by a proportion of 48%.
What is the significance of price elasticity of supply?
Price elasticity of supply can be referred to or considered as a change in the quantity supplied of a product or a service due to a given change in its price.
When price elasticity of supply is 2.4, then a change in price by 20% will lead to a change in the quantity supplied of 20 × 2.4 = 48. The change will be denoted in percentage.
Therefore, the significance regarding price elasticity of supply has been aforementioned.
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