If price of yams decreases from N15.00 per tuber to N13.50 and the quantity supplied decreases by 20%. What is the elasticity of supply?

Analyze the question: We need the price elasticity of supply (PES) when price falls from N15.00 to N13.50 and quantity supplied falls by 20%.

Concept: PES = % change in quantity supplied ÷ % change in price

Since supply follows the law of supply (price and quantity move in the same direction), PES is normally positive. We take the magnitude of each change.

Solution:

1. Change in price = 13.50 − 15.00 = −N1.50
2. % change in price = (1.50 ÷ 15.00) × 100 = 10% (a decrease)
3. % change in quantity supplied = 20% (a decrease)

PES = 20% ÷ 10% = 2.00

Since 2.00 is greater than 1, supply is elastic.

Answer: Option A, 2.00.

Why the others are wrong:

• B (0.50) comes from flipping the formula (10 ÷ 20).
• C and D don't come from any correct use of the numbers.

Tip: Always put the quantity change on top and the price change at the bottom. Remember "Q over P". Compute the percentage change using the original price (N15.00) as the base. Students often make mistakes by using the new price.