Answer:
increase by 8 percent
Explanation:
Price elasticity of supply of a product is the degree of responsiveness of supply of that product to a change in price. Simply put:
Price Elasticity of supply = change in quantity supply/ change in price.
In this case, price elasticity of supply of gasoline = 0.4
Percentage price increase = 20 percent.
Hence,
0.4 = change in supply/20
Change in supply = 20 x 0.4 = 8 percent
Therefore, the quantity supply of gasoline will increase by 8 percent
