To calculate the price elasticity of supply (PES) of milk, we use the formula:

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To calculate the price elasticity of supply (PES) of milk, we use the formula:

PES = \frac{\%\Delta Q_s}{\%\Delta P}

where $\%\Delta Q_s$ is the percentage change in quantity supplied and $\%\Delta P$ is the percentage change in price.

Identify the initial and final quantities and prices from the text.
Initial Quantity ( $Q_1$ ) = 62 million litres
Final Quantity ( $Q_2$ ) = 98 million litres
Initial Price ( $P_1$ ) = 40 US cents
Final Price ( $P_2$ ) = 58 US cents
Calculate the percentage change in quantity supplied ( $\%\Delta Q_s$ ).
$\%\Delta Q_s = \frac{Q_2 - Q_1}{Q_1} \times 100\% = \frac{98 - 62}{62} \times 100\% = \frac{36}{62} \times 100\% \approx 58.06\%$
Calculate the percentage change in price ( $\%\Delta P$ ).
$\%\Delta P = \frac{P_2 - P_1}{P_1} \times 100\% = \frac{58 - 40}{40} \times 100\% = \frac{18}{40} \times 100\% = 45\%$
Calculate the Price Elasticity of Supply (PES).
$PES = \frac{58.06\%}{45\%} = \frac{0.5806}{0.45} \approx 1.29$
The price elasticity of supply of milk is approximately 1.29.

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